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Recognizing that where a non-compete agreement is presented “more as an ultimatum than as a matter to be negotiated,” an employee’s refusal to sign the non-compete did not constitute misconduct disqualifying one from unemployment benefits, the Missouri Court of Appeals ruled recently.

In this case, the employer announced on January 24 that it would be implementing a new non-compete agreement for its employees. The message later communicated to the individual was that February 1 was his last day to execute the non-compete agreement, if he wished to keep his job.

Terms of the New Non-Compete

The Court of Appeals first noted that pursuant to the agreement, the former employee would have been required to abide by the terms of the non-compete agreement for at least three years, with the potential for up to three additional years from the date any violation of the agreement would have been found to have ceased. The non-compete clause, by its terms, would have applied throughout the United States and all its territories, and would have applied very broadly to the former employee’s future endeavors, prohibiting him from engaging “in any business competing directly or indirectly with any product, venture, or service related in any manner to or concerning the company’s business.”

What Would a Reasonable Person Do?

The court added that the proposed new non-compete agreement was presented to the former employee with an ultimatum that it be signed within a very short period of time, affording him only a limited opportunity to review the draft agreement and to seek legal advice.

As part of its legal analysis, the appeals court applied an objective standard of a reasonable person confronting the same situation, and held that the former employee was faced with “external pressures so compelling that a reasonably prudent person would be justified in terminating his employment.”

In conclusion, the court found, given these particular facts, that there was competent and substantial evidence which demonstrates that the individual met his burden of establishing both the reasonableness and the good faith of his actions. Thus, the Labor and Industrial Relations Commission erred in finding that the former employee was disqualified from receiving benefits.