Understanding Missouri Non-Compete Law

Non-compete agreements are the norm in a great number of industries.  Understanding the implications of these agreements is of importance to both employers and their employees.  As an employer, you may need to bring a claim against a former employee for breach of their employment agreement following the end of their employment with the company.  As an employee, you may find yourself defending a claim of breaching your employment agreement. The Law Offices of Kevin J. Dolley has extensive experience working with employers, management, executives and employees on non-compete issues in Missouri.  The following information is a helpful starting point and Attorney Kevin J. Dolley is available to speak with you directly regarding any specific Missouri non-compete law questions.  Mr. Dolley can be reached directly at (314) 645-4100. 

What Exactly is Covered by a Non-Compete Agreement?

As a general rule, the law should not put any restraints on trade.  Therefore, non-compete agreements are only enforceable to the extent they are reasonable.  Easy Returns Midwest, Inc. v. Schultz, 964 S.W.2d 450, 453 (Mo.App. 1998).  Further, non-compete agreements are only enforceable when they are protecting two narrowly-defined and well-recognized interests: trade secrets and customer contacts.  Healthcare Services v. Copeland, 198 S.W.3d 604, 610 (Mo. 2006).  A non-compete agreement is "enforceable only to protect against unfair competitive use of either customer contacts or trade secrets."  Victoria's Secret Stores v. May Dept. Stores, 157 S.W.3d 256, 262 (Mo.App. 2004). 

What Does "Reasonable" Mean? 

Reasonableness is an issue of law determined by 1) the non-compete agreement itself, and 2) existing factual circumstances.  West Group Broadcasting, Ltd. v. Bell, 942 S.W.2d 934, 937 (Mo.App. 1997).  In Missouri, courts will enforce the agreement if it is no more restrictive than necessary to protect the legitimate interests of the employer.  American Pamcor, Inc. v. Klote, 438 S.W.2d 287, 290 (Mo.App. 1969).  One such legitimate interest is the right to have a competitive and profitable workforce without fear than an employee will steal customers or secrets after leaving employment.  See Bell, 942 S.W.2d at 937.  Another is the freedom of both parties to freely enter into the non-compete contractual agreement.  Willman v. Beheler, 499 S.W.2d 770, 777 (Mo. 1973).    

Two major issues with reasonableness, are the temporal and geographic aspects to the restrictions created by the non-compete agreement.  Healthcare Services, 198 S.W.3d at 610.  There is no hard rule as to what is "reasonable" in Missouri, and thus finding a knowledgeable attorney can mean the difference between winning or losing your case.  Attorney Kevin J. Dolley frequently reviews and drafts non-compete agreements, as well as provides legal counsel on the reasonableness and enforceability of a particular agreement under the facts and circumstances of the case.  

What is a "Trade Secret"?

Missouri statute 417.453(4) defines "trade secret" as information, including but not limited to, technical or nontechnical data, a formula, pattern, compilation, program, device, method, technique, or process, that has economic value and is not readily obtainable by the public and for which efforts have been made to keep the information a secret.  Information that is known throughout the industry does not get trade secret protection.  Kessler Heasley Artificial Limb Co., Inc. v. Kenney, 90 S.W.3d 181, 188-89 (Mo.App. 2002). 

In Missouri, determination of whether given information is a trade secret depends on six factors:  (1) the extent to which the information is known outside of the business; (2) the extent to which it is known by employees and others involved in the business; (3) the extent to which measures are taken to guard the information; (4) the value of the information to the company and its competitors; (5) the amount of effort or money expended in developing the information; and (6) the ease or difficulty with which the information could be properly acquired or duplicated by others.  Healthcare Services, 198 S.W.3d at 611. 

The employer has the burden of proving a substantiated interest in the information and the evidence must be sufficiently specific to allow a determination by the court.  Id.  While marking information "confidential" does tend to suggest trade secret status, an agreement can protect information even without such a marking.  Lyn-Flex West, Inc. v. Dieckhaus, 24 S.W.3d 693, 699 (Mo.App. 1999). 

What are "Customer Contacts"?

Missouri courts have recognized that employers have an interest in retaining customers after the end of a particular employee's employment.  See, e.g., Brown v. Rollet Bros. Trucking Co., 291 S.W.3d 766, 774 (Mo.App. 2009).  Courts protect these customer contacts because the goodwill between customers and individual employees is essential to a company's success.  See AEE-EMF, Inc. v. Passmore, 906 S.W.2d 714, 720 (Mo.App. 1995).           

To determine the reasonableness of a non-compete agreement, Missouri courts look at the quality, frequency, and duration of an employee's exposure to the employer's customers.  Healthcare Services, 198 S.W.3d at 611.  The purpose of a non-compete is to keep the employee out of a situation in which customer contacts can be used to the former employer's disadvantage.  Osage Glass, 693 S.W.2d at 75.  However, preventing the employee from seeking out new customers may or may not exceed the reach of the non-compete agreement.  Id.  The determination of the nature and extent of customer contacts is a factually-intensive process commonly requiring detailed legal analysis.  

As an Employer, am I Liable if One of my New Employees is Violating a Non-Complete Agreement from a Former Employer?

As an employer, if you know that a new employee is subject to a non-compete agreement, and if the employee's responsibilities with you require violation of that agreement, you may be liable.  Property Tax Representatives, Inc. v. Chatham, 891 S.W.2d 153, 159 (Mo.App. 1995).  The former employer could bring an action against you for tortious interference or civil conspiracy.  Lyn-Flex West, 24 S.W.3d at 700.  If you mistakenly believe the employee's non-compete agreement is unenforceable, you still may be liable.  Chatham, 891 S.W.2d at 159.  If a current employee has been sued for violation of a non-compete agreement, your company could be added to the suit.  Commonly, the new employer receives what is commonly referred to as a "cease and desist" letter prior to the initiation of any such litigation.  The timely hiring of legal counsel to evaluate the situation and avoid litigation or limit liability is often necessary in these situations.       

I Violated my Non-Compete Agreement, but I Have a Good Excuse!

There are some instances in which employees are excused from violating non-compete agreements.  For example, if an employer violates the non-compete agreement before the employee, that employer may not be able to enforce the agreement, in whole or in part.  Luketich v. Goedecke, Wood & Co., Inc., 835 S.W.2d 504, 507 (Mo.App. 1992).  However, if the employee never complained about the violation, this defense may fail.  Forms Mfg. Inc. v. Edwards, 705 S.W.2d 67, 69 (Mo.App. 1985).  Other defenses do exist, but their success is largely dependent upon the specific facts of the non-compete agreement and the nature of the employment at issue. 

As a a Non-Profit Corporation, Do the Same Rules Apply?

Yes, non-profit corporations are entitled to protect themselves just like for-profit corporations by imposing non-compete limitations upon employees.  Healthcare Services, 198 S.W.3d at 614.  In the healthcare context, for example, patient lists are a protectable business interest.  Id.  

Conclusion

As with many legal issues, non-compete law in Missouri can be complicated and confusing and often requires involvement of specialized legal counsel.  Attorney Kevin J. Dolley has direct experience working with both employers and employees in non-compete cases and is available to answer any questions you have.  You can contact The Law Offices of Kevin J. Dolley at 314-645-4100.