Missouri: True Non-Competition Agreements Are Still Enforceable, But Solicitation Restrictions Must Be Limited To Existing Customers With Whom The Employee Dealt During Employment

The Missouri Supreme Court rarely entertains non-competition cases. In Health Care Services of the Ozarks, Inc. v. Copeland, 198 S.W.3d 604 (Mo. 2006), the court enforced a non-solicitation of customers and a true non-competition agreement. In Copeland, the employee had not directly challenged the validity of the non-competition provision. The court, in dicta, nevertheless suggested that true non-competition agreements (i.e., those agreements that preclude competition in general or in a specified geographic region) may not be enforceable. Fast forward six years, and the court, with a significantly different makeup, held in Whelan Security Company v. Kennebrew and Morgan, No. SC92291 (Mo. Aug. 14, 2012), that true non-competition agreements are, indeed, enforceable in Missouri. In doing so, the court broadly construed agreements that restrict an employee's post-employment activities for a reasonable time and within a reasonable geographic area. The court also placed restrictions on agreements prohibiting solicitation of customers, limiting the enforceability of those agreements to customers with whom the employee dealt during his or her employment.

Background

Whelan Security is a nationwide security guard services firm with operations in 23 states. As a condition of their employment, two employees signed an employment contract that contained non-competition and non-solicitation clauses. The non-competition clause limited competition for two years within a 50-mile radius of the location where the employee provided services. The non-solicitation agreement precluded the employees from soliciting customers, potential customers, and employees of the company for two years. In 2009, following the resignation of both employees, one employee solicited a current company client, and the second employee solicited his former co-workers to leave the company and work for a competitor. The employer sued both employees to enforce the non-competition and non-solicitation agreements.

The Supreme Court's Decision

The Missouri Supreme Court reversed a lower court decision and: (1) enforced the non-competition agreement with a 50-mile radius; (2) judicially modified the non-solicitation of customers clause to limit it to actual customers with whom the employees had contact while working for the company; and (3) remanded to the trial court the question of whether a two-year non-solicitation of employees provision is enforceable.

With respect to the...