Employee Non-Compete Agreements
Run a business long enough and you are bound to encounter a situation in which a high-level employee leaves your company to go work for the competition. When employees have access to sensitive information, such as customer lists or company trade secrets, employers understandably want to curb these individuals’ ability to spread that information around to competing businesses. To prevent former employees from misusing sensitive data, many employers turn to non-compete agreements. Non-compete provisions in employment contracts are formally known as a type of “restrictive covenant.” Although they are legally permissible, employers must be careful to respect a former employee’s right to earn a living when drafting non-compete agreements.
Non-Compete Agreements in Missouri
Non-compete and non-solicitation provisions in employment contracts are enforceable in Missouri as long as they are “reasonable.” More specifically, they must strike the proper balance between the employer’s legitimate business interests and the former employee’s ability to work within his given industry. Through case law, Missouri courts have created specific criteria that determine whether a non-compete agreement is reasonable:
The non-compete must be reasonably limited in time
This provision is pretty self-explanatory. To be enforceable, a non-compete can’t restrict a former employee from working for a competitor for an unreasonable length of time. Although there are no hard and fast rules regarding how much time is acceptable, most courts are willing to accept two years or less.
The non-compete must be reasonably limited in geographic territory
As with time, the non-compete can’t attempt to capture a huge geographic region. When employers try to cast an unreasonably large net, such as the entire state, it has a chilling effect on an employee’s ability to find a job. Courts examine each case independently to determine whether a non-compete is too broad in scope.
The non-compete must serve a “legitimate business interest” of the employer
In addition to being narrowly tailored in time and territory, a non-compete must be narrowly drawn to protect the employer’s legitimate business interest. What constitutes a legitimate business interest varies from cases to case, however, courts have held that employers have a legitimate business interest in protecting trade secrets, intellectual property, customer lists, and company formulas. Courts are more likely to uphold non-competes when an employer’s legitimate business interests are narrowly defined within the agreement.
Protect Your Business and Your Bottom Line
Employment contracts must be carefully drafted to ensure your business is protected and your employees’ rights are upheld. Whether you have one employee or 100 people working for you, it is inadvisable to try drafting a non-compete agreement on your own. To discuss your business needs with one of our knowledgeable attorneys, call our office today at 417-841-2775.