## Facts

- Alex Sheshunoff Management Services, L.P. (ASM), a consulting firm for financial institutions, employed Kenneth Johnson as an at-will employee starting in 1993.
- In 1997, ASM promoted Johnson to director of its client “Affiliation Program.”
- ASM required Johnson to sign an at-will employment agreement containing a covenant not to compete as a condition of continued employment; Johnson signed in January 1998.
- The agreement expressly allowed either party to terminate at any time and promised that ASM would provide Johnson special training and access to confidential and proprietary information.
- ASM provided Johnson specialized training and confidential information about its methods and client relationships.
- In 2001, Johnson resigned and joined Strunk & Associates, a competitor; ASM alleged Johnson solicited ASM clients and used ASM’s confidential information in violation of the agreement.
- The trial court granted a temporary injunction enforcing the noncompete to some extent.
- The court of appeals reversed, concluding the noncompete was unenforceable because ASM’s promises were illusory at the time of signing under then-existing precedent.

## Issues

1. Whether a noncompetition covenant in an at-will employment agreement is enforceable under the Texas Covenants Not to Compete Act when the employer’s promised consideration was arguably illusory at signing but later performed.
2. Whether employer performance (providing promised training and confidential information) can supply an “otherwise enforceable agreement” to which the noncompete is ancillary.

## Decision

- The Supreme Court of Texas reversed the court of appeals and remanded.
- The court held that an at-will noncompete can become enforceable when the employer performs the promised consideration supporting the covenant.
- Because ASM actually provided the promised training and confidential information, the agreement became “otherwise enforceable,” making the noncompete ancillary to that agreement and enforceable under the Act.

## Legal Principles

- Under the Texas Covenants Not to Compete Act, a covenant not to compete is enforceable if it is ancillary to or part of an otherwise enforceable agreement at the time it is made and contains reasonable limits as to time, geographic area, and scope of restrained activity.
- In at-will employment, an employer promise that may appear illusory at signing can satisfy the “otherwise enforceable agreement” requirement once the employer performs by providing consideration such as confidential information or specialized training.
- A noncompete is enforceable when tied to a legitimate business interest, including protection of confidential information, proprietary methods, and goodwill arising from employer-provided client access and training.

## Conclusion

The Supreme Court of Texas held that an at-will employee’s noncompete is not automatically void because employer promises were illusory at signing; if the employer later provides the promised training or confidential information, the agreement becomes otherwise enforceable and the noncompete may be enforced subject to the Act’s reasonableness limits.


Alex Sheshunoff Mgmt. Servs., L.P. v. Johnson, 209 S.W.3d 644 (Tex. 2006)