Understanding your non-compete agreement
In Missouri courts balance four factors in reviewing non-compete agreements: (1), Needs of an employee to engage a highly trained workforce, without fear of employee's using the company's business secrets against it or stealing of employer's customers; (2), Employee's mobility in order to provide for family and career advancement in a changing marketplace; (3), freedom of the parties to value their interests in negotiated contracts; (4) contracts in restraint of trade of unlawful.
Non-compete agreements are typically enforceable as long as they are reasonable, which means narrowly tailored geographically and temporally. Additionally, the restrictions are not enforceable to protect an employer from mere competition, but only to the extent that the restrictions protect the employer's trade secrets or customer contacts.
Missouri courts have found the following facts should be considered in determining whether given information is a trade secret:
- The extent to which the information is known outside of his business;
- The extent to which it is known by employees and others involved in his business;
- The extent of measures taken by him to guard the secrecy of the information;
- The value of the information to him and to his competitors;
- The amount of effort or money expended by him in developing the information;
- The ease or difficulty with which the information could be properly acquired or duplicated by others.
“Customer contacts” has been defined as “essentially the influence an employee acquires over his employer's customers through personal contact.” The quality, frequency, and duration of an employee's exposure to an employer's customers are crucial in determining the covenant's reasonableness. The purpose of a non-compete agreement is “to keep the covenanting employee out of a situation in which he might be able to make use of contacts with customers to his former employer's disadvantage.”
Enforcing non-compete agreements involves a delicate balance of practical business considerations. While the former employee is free to compete, the former employer is entitled to utilize non-compete agreements to protect itself from unfair competition by misuse of its trade secrets or misuse of the employee's customers contacts developed at its expense. “Protection of the employer, not punishment of the employee, is the essence of the law.”
It could be argued that preventing a former employee from seeking new customers in competition with his or her former employer goes beyond protecting the employer's interest and is overly restrictive. However, in many situations it may be difficult to distinguish between competition for new or existing customers.
What to do if you are presented a non-compete:
- Don't sign it.
- Contact an attorney.
- Have them review the non-compete.
- Then armed with understanding of the risks and benefits, make an informed decision.