It has been six years since the Missouri high court in Healthcare Servs. of the Ozarks, Inc. v. Copeland, 198 S.W.3d 604 (Mo. 2006), reviewed a case involving a non-competition agreement restricting a former employee’s ability to compete with the employer after leaving its employment. The Court in its latest decision now confirms that non-competition agreements are enforceable to the extent they are reasonable and necessary to protect the employer’s legitimate protectable interests. In addition, the reasonableness of an agreement generally depends upon a fact-specific inquiry. Whelan Security Co. v. Kennebrew, 2012 Mo. LEXIS 167 (Mo. Aug. 14, 2012).
The two agreements in Whelan Security contained the following:
- customer non-solicitation provisions against soliciting clients and prospective clients,
- employee non-solicitation provisions against soliciting the employer’s employees, and
- territorial non-compete provisions against the employee’s working for a competitor within 50 miles of any location at which the employee had provided or arranged for Whelan’s services.
The Court found the customer non-solicitation provisions overbroad and unenforceable. As written, they applied to all of the employer’s existing customers throughout the nation (regardless of whether the former employees had ever dealt with them) and to all of the employer’s prospective customers from the last 12 months (regardless of how tenuous the employer’s relationships with these potential customers were or how detached the former employees had been from them). While the Court did not hold these provisions per se unreasonable and unenforceable, it blue-penciled or modified the no-solicitation- of-clients provisions to apply to existing customers with whom the former employees had dealt with during their employment. The prohibition against soliciting the employer’s prospective customers was overly broad. The Court indicated, however, that prospective customers can be covered under certain circumstances, though not in this case.
Next, the Court held the two-year 50-mile territorial prohibition in one of the agreements was reason-able and enforceable as written. Finally, it found the one-year employee non-solicitation provision in one of the agreements was per se reasonable and enforceable under Section 431.202.2 of the Missouri Revised Statutes. However, it also found that a genuine issue of material fact existed under the statute as to the enforceability of the two-year employee non-solicitation provision. Section 431.202.2 contains a one-year safe harbor. As nothing in the agreement indicated that the provision was to protect interests listed in Section 431.202.2(3) (i.e., “confidential or trade secret business information,” and “[c]ustomer or supplier relationships, goodwill or loyalty”), the Court remanded the case to determine whether a statutorily valid purpose existed.