Courts will not enforce non-compete provisions in employment contracts when the employer breached the employment contract, too. That is the lesson of Insgroup, Inc. v. Langley, No. 14-18-01071-CV, 2020 WL 1679401 (Tex. App.-Houston [14th Dist.] Apr. 7, 2020, no pet. h.). In Insgroup, Insgroup’s employee Langley’s employment agreement with Insgroup contained a non-compete provision. Under the agreement, Insgroup was also to treat Langley as an employee and, as such, provide him access to insurance benefits, withhold his taxes, and allow him to contribute a 401(k) plan. The employment agreement automatically renewed in May 2018.
In August 2018, Insgroup provided Langley with a different agreement that treated him as an independent contractor. Langley refused to sign but continued to work for Insgroup. Insgroup, though, treated Langley as if he had signed the new agreement, and Insgroup did not withhold payroll taxes, deduct insurance premiums, or withhold 401(k) contributions.
Eventually, Langely resigned from Insgroup and went to work for a competitor. Insgroup filed a request for injunctive relief, seeking to enforce the non-compete provision in the original agreement. The trial court, however, refused to do so, holding that because “Insgroup breached the portion of the agreement favorable to Insgroup [by failing to provide Langley employee benefits], it has failed to show entitlement to injunction based on Langley’s breach of [the non-compete] portion of the same agreement.”
Employers need to remember this case when seeking an injunction to enforce a non-compete.