The Missouri Supreme Court recently held that a non-compete agreement limiting the solicitation of potential customers of a large, national company was overbroad. A non-compete agreement is meant to protect an employer’s trade secrets and/or customer contacts. In order to be enforceable, the agreement must have reasonable time and geographic limitations. Also, the agreement cannot be broader than necessary to protect the employer’s interests. Employers have a legitimate interest in protecting against the influence obtained by an employee’s personal contacts with a customer. However, a non-compete agreement should not protect an employer from all competition, just unfair competition. The non-compete agreement should be worded carefully to limit its scope. The ultimate goal is to protect the employer, not punish the former employee.
In Whelan Security Co. v. Kennebrew, two former employees of Whelan challenged the scope of their non-compete agreement. The agreement restricted the former employees from soliciting prospective customers whose business was sought by Whelan during the last 12 months of their employment. In its decision, the Missouri Supreme Court emphasized that Whelan is a large, national corporation with locations in many different states. In addition, the former employees did not have any significant personal contact with potential clients outside of the area where their branches were located. The court noted that if it chose to enforce that non-compete as it was written, the protection afforded to Whelan would be more than is necessary to protect its legitimate customer contacts. Ultimately, the court modified the non-compete agreement to only prohibit the solicitation of potential customers with whom the former employees personally dealt with during their employment.
The Whelan decision makes it clear that non-compete agreements need to be drafted in such a way as to protect the employer’s interest while not infringing upon the rights of employees. Overly board non-compete agreements are not enforceable as written, and a court can choose to disregard or modify them as necessary.