Non-Compete Agreements Under Missouri Law
We are experienced in handling a wide variety of issues associated with non-compete agreements. These issues range from enforcement and defense of non-compete agreements to counseling clients regarding how to draft or amend non-compete agreements to avoid common issues. Our experience includes bringing lawsuits seeking to enforce non-compete agreements through declaratory judgment actions, temporary restraining orders and other injunctive relief, as well as defending those who have allegedly breached non-compete agreements by working for a purported competitor. Whether you are an employee or employer, we know the substantive and procedural rules and rights at issue in such legal proceedings. Such knowledge and experience in non-compete disputes are critical to successfully navigating and resolving these actions, through settlement, trial or otherwise.
What is a Non-Compete Agreement?
A non-compete or “non-competition” agreement often seeks to prohibit an employee from working for a competitor for a certain length of time following the end of the employee’s employment. A non-solicitation agreement, on the other hand, often seeks to prohibit an employee from soliciting the employer’s customers, clients, or other employees for a period of time following the end of employment.
Non-competition and non-solicitation agreements are often referred to in the law as “restrictive covenants.” They are commonly included as a term within an employment contract, but they may also be the subject of a separate, stand-alone agreement. Both types of agreements commonly contain closely related “non-disclosure” agreements and restrictions that forbid an employee from disclosing or using trade secrets or other confidential information of the employer.
It is not uncommon for companies to require employees to sign a non-compete agreement as a condition of starting or continuing employment. Employees subject to noncompete agreements range from high-level “executive” employees to salespeople or people who have substantial customer contacts. Every case, however, stands on its own specific facts. Job titles are not controlling. In each case, a court will consider a wide variety of facts about the employee and non-compete in question to discern whether the non-compete is valid and should be enforced. To be valid and enforceable, a non-compete must serve to protect legitimate business interests in the form of trade secrets or customer contacts. However, not all information learned, skills acquired, or contacts gained, as a result of employment will constitute “protectable interests” of the employer that warrant enforcement of a non-compete agreement.
Protectable Interests Under Missouri Non-Compete Law
A non-compete is valid and enforceable only to the extent necessary to protect trade secrets and customer contacts. Whelan Sec. Co. v. Kennebrew, 379 S.W.3d 835, 841-42 (Mo. banc 2012). An employer cannot enforce a non-compete merely to protect itself from future competition, as it “must be prepared to encounter that even at the hands of a former employee.” Id. at 843. The focus of the law is on preventing unfair competition resulting from unauthorized use, appropriation, or disclosure of protectable interests of a former employer on behalf of a new employer or venture, such as trade secrets or other sensitive information about the former employer’s operations, clients, customers, formulas, pricing, strategy, salary, methods and practices, ideas, future products, or marketing plans.
Considerations of Reasonableness Under Missouri Non-Compete Law
Non-competition and non-solicitation covenants must be reasonable in their scope in terms of subject matter, time, and geography. Ultimately, such agreements are only enforceable to the extent necessary to safeguard a “protectable interest” of the employer. Accordingly, they should be narrowly drafted and should be specific to the circumstances of the employee, as well as the particular interest(s) of the employer at issue. For example, a non-compete agreement for a salesperson will likely need to be different in subject matter and scope than a non-compete agreement for an employee engaged in technical or innovative work on a company’s proprietary product or trade secrets.
The determination of whether the scope of a non-compete agreement is reasonable under Missouri law involves a highly fact-intensive analysis of the circumstances. The Missouri Supreme Court has set out a standard for reasonableness of non-competes that seeks to balance the competing interests and concerns of both the employer and employee. Whelan, 379 S.W.3d at 841. On one hand, employers have a legitimate interest in engaging a highly trained workforce without risking losing customers and business secrets after an employee leaves his or her employment. Id. On the other hand, employees have a legitimate interest in having mobility between employers to provide for their families and advance their careers. Id. Although the law favors the ability of parties to contract freely, contracts that unfairly restrain trade are unlawful. Id.
In balancing these competing interests, Missouri courts generally enforce a non-compete agreement if it is demonstratively reasonable under the circumstances. Whelan, 379 S.W.3d at 841. A non-compete agreement is reasonable if it is no more restrictive than necessary to protect the legitimate interests of the employer. Id. A non-compete agreement must be narrowly tailored in its length and geographic scope and must seek to protect legitimate employer interests beyond mere competition by a former employee. Id. at 842.
Two major issues with reasonableness are the temporal and geographic aspects of the non-compete agreement. Healthcare Svcs. of the Ozarks v. Copeland, 198 S.W.3d 604, 610 (Mo. banc 2006). In 2012, the Missouri Supreme Court enforced a two-year non-compete for an operations manager subject to a restriction covering a 50-mile radius from where services were rendered by the employee during employment. Whelan, 379 S.W.3d at 847. However, in 2014, the Missouri Court of Appeals refused to enforce a non-compete agreement with no geographic limitation despite the business’s position that it maintained a “global” reach. Sigma-Aldrich Corp. v. Vikin, 451 S.W.3d 767, 772-73 (Mo. Ct. App. 2014).
Considerable precedent in Missouri supports the reasonableness of a non-compete lasting between one, and sometimes up to two years, which is otherwise drawn narrowly to protect the employer’s legitimate interests. See Whelan, 379 S.W.3d at 846-47 (“Considerable precedent in Missouri supports the reasonableness of a two-year non-compete agreement for an operations manager that is limited to 50 miles from where services were rendered by the employee”); Alltype Fire Protection Co. v. Mayfield, 88 S.W.3d 120, 123-24 (Mo. Ct. App. 2002) (enforcing a two-year non-compete agreement spanning a 100-mile radius against a customer service representative); Washington Cty. Mem. Hospital v. Sidebottom, 7 S.W.3d 542 (Mo. Ct. App. 1999) (enforcing a 50-mile noncompete radius).
A lack of a geographic restriction in a non-compete agreement may potentially render it unenforceable. See, e.g., Sigma-Aldrich Corp., 451 S.W.3d at 772-73. However, Missouri courts enforce customer non-solicitation clauses without a geographic limitation when other limitations to the prohibited conduct exist or when the employee had significant contact with a substantial number of the employer's customers. Whelan Sec. Co., 379 S.W.3d at 842.
There are few universal rules in non-compete litigation because various factual circumstances may render a non-compete agreement “reasonable” in one employment context but “unreasonable” in another. Thus, it is always important to retain counsel to develop a detailed understanding of the rights, duties, and interests at stake in any given situation to have a sense of whether a non-compete agreement would be found valid and enforceable by a court.
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If you are seeking a better understanding of non-compete law, please do not hesitate to contact our office directly to review the situation. We may be reached at (314) 645-4100 or by email at kevin@dolleylaw.com.