Since July 1, 2001, Missouri law with respect to non-solicitation clauses has been fairly straightforward. Specifically, § 431.202 of the Missouri Statutes states that a covenant not to solicit between an employer and an employee is presumed reasonable if it is no longer than one year in duration and designed to protect confidential information, customer relationships, and/or good will. Section 431.202 also states that the statute does not apply to covenants not to compete, thereby allowing the courts to decide the enforceability of a non-competition clause on a “case-by-case” basis. (Id. § 3).
A Bill, however, currently pending in the Missouri House of Representatives seeks to abolish Missouri’s non-solicit statute and ban all restrictive covenants except for those restrictive covenants found in a “business to business” setting. Specifically, House Bill 479, introduced by Representative Keith Frederick (R), seeks to eliminate all types of restrictive covenants (non-compete, non-solicit, and non-hire) except when the restrictive covenants involve the sale of a business or are between two corporations engaged in a joint venture. The Bill would go into effect August 28, 2017. Thus, any restrictive covenant agreement between an employer and an employee that is a) controlled by Missouri law and b) entered into after August 28, 2017 would be unenforceable.
In addition to House Bill 479, a recent Federal Court decision in the Eastern District of Missouri also has the attention of non-compete lawyers. In Durrell v. Tech Electronics, Inc., plaintiff Robert Durrell brought suit against his former employer, Tech Electronics, Inc., alleging that he was wrongfully terminated and retaliated against for taking FMLA leave. Durrell’s Complaint further alleges that the restrictive covenants found in his Employment Agreement are unenforceable due to a lack of consideration. The Court denied Tech’s Motion to Dismiss Durrell’s restrictive covenant claims by ruling that at-will employment is “not a source of consideration under Missouri contract law.” Notably, the Court did not address § 431.202’s specific language that a non-solicitation clause is enforceable if it protects confidential information, customer relationships, and/or good will. In fact, the Court does not even mention § 431.202 in its opinion. (Probably because the Court was only asked to address whether “at-will employment” is sufficient consideration for enforcing a restrictive covenant).
We will continue to monitor House Bill 479 (the Bill is currently in “Executive Session”) as well as the Durrell case, and will provide all relevant updates on this blog.