By: Attorney Shira Truitt
A non-compete clause, also known as a restrictive covenant, is a provision in an employment contract that restricts an employee from competing with their employer or former employer. Non-compete clauses are often used to protect the employer's business interests, such as trade secrets, customer relationships, and intellectual property.
There are several situations in which a non-compete clause may be triggered. Some common examples include:
Termination of employment: When an employee's employment is terminated, a non-compete clause may be triggered if the employee plans to work for a competitor or start their own competing business.
Resignation: If an employee resigns from their job, a non-compete clause may be triggered if the employee plans to work for a competitor or start their own competing business.
Sale of a business: When a business is sold, non-compete clauses may be included in the purchase agreement to prevent the seller from competing with the buyer.
In Missouri and Illinois, the enforceability of non-compete agreements is governed by state law. Both states have adopted the Uniform Trade Secrets Act (UTSA), which provides some guidance on the enforceability of non-compete agreements. However, non-compete agreements are subject to additional state-specific laws and judicial interpretation.
In Missouri, non-compete agreements are generally enforceable as long as they are reasonable in scope and duration. To be reasonable, a non-compete agreement must be no broader than necessary to protect the employer's legitimate business interests and must not impose undue hardship on the employee. Additionally, non-compete agreements must be supported by consideration, meaning the employee must receive something of value in exchange for agreeing to the non-compete.
In Illinois, the enforceability of non-compete agreements is governed by the Illinois Freedom to Work Act, which limits the ability of employers to restrict an employee's ability to work for a competitor. Under the Act, non-compete agreements are only enforceable if they are (1) necessary to protect the employer's legitimate business interests, (2) reasonable in scope, and (3) reasonable in duration. Like in Missouri, non-compete agreements must also be supported by consideration.
It is important to note that non-compete agreements may be subject to additional legal challenges, such as claims of unlawful restraint of trade or violation of public policy. Additionally, non-compete clauses may be considered unreasonable or overly restrictive if they prevent an employee from working in their chosen field or limit their ability to earn a living. Employers should carefully review and consider the specific circumstances of their business and the potential impact of a non-compete agreement on their employees before requiring employees to sign one.
Drafting a non-compete clause can be time-consuming but, if done correctly, it can easily achieve the goal and purpose for which it was done.
References:
Illinois Freedom to Work Act, 820 ILCS 90/1 et seq.
Missouri Revised Statutes, Chapter 416.
Uniform Trade Secrets Act, 14 U.L.A. 757 (1987).
Non-Compete Agreements. (n.d.). Nolo. Retrieved from https://www.nolo.com/legal-encyclopedia/non-compete-agreements.html
Non-Compete Clauses in Employment Contracts. (n.d.). The Balance Small Business. Retrieved from https://www.thebalancesmb.com/non-compete-clauses-in-employment-contracts-2948557
Non-Compete Agreements: What You Need to Know. (n.d.). Society for Human Resource Management. Retrieved from https://www.shrm.org/resourcesandtools/tools-and-samples/hr-qa/pages/noncompeteagreements.aspx
If you need legal advice or a lawyer in Illinois or Missouri, please contact The Truitt Law Firm, LLC for assistance. For more information on The Truitt Law Firm, LLC or to schedule an appointment, please go to www.thetruittlawfirm.com.
