By Ron Campbell
It is not uncommon for an employment agreement to include a provision prohibiting an employee from competing with his or her employer upon termination of employment. These provisions are generally enforceable under Kansas law. It is longstanding Kansas public policy that freedom of contract is not to be interfered with lightly. Kansas courts have upheld non-compete agreements involving physicians, barbers, nurse practitioners, and numerous types of salespeople. However, such agreements are not automatically enforceable. A threshold requirement is that the non-compete agreement must be part of a valid and enforceable contract under general principles of contract law. Furthermore, the non-compete agreement must be reasonable under the circumstances.
An analysis of whether a non-compete provision in an employment contract is reasonable depends upon the following factors:
1. Whether the covenant protects a legitimate interest of the employer;
2. Whether the covenant creates an undue burden on the employee;
3. Whether the covenant is injurious to the public welfare; and
4. Whether the time and limited territorial limitations are reasonable.
For purposes of the first factor, “customer contacts” are well recognized as a protectable interest, as are trade secrets or other sensitive information pertaining to the employer’s business practices.
Fleeson, Gooing recently defended an employer (Employer B) and its new employee against a suit brought by the employee’s former employer (Employer A). The employee was a service technician whose duties included servicing transport units. Although he had several years of experience, he was asked by Employer A to attend a training class. Upon his return, he was asked to sign a non-compete agreement, which he did. A few years thereafter, the employee’s job duties changed, and he was doing less technical service work. He looked for and found employment with another company servicing transport units. Employer A sued the employee for breach of the non-compete agreement and sued Employer B for tortious interference with contract. Employer A asked the court to enter an injunction preventing the employee from working for Employer B.
After hearing the evidence, the court refused to enjoin the employee from working for the new employer. The court found that the employee did not possess any trade secrets and that Employer A did not have a legitimate business interest in preventing the employee from working for Employer B. The employee’s customer contacts did not have any sort of meaningful impact in generating business for Employer A. Although the employee received general training from Employer A, general skills acquired in working for an employer may be transferred and cannot be protected by a covenant not to compete. The court further found that the non-compete covenant created an undue burden on the employee.
In summary, an employee who signs a non-compete agreement with his employer should expect that it will be enforced. However, if the employer does not have a legitimate business interest in preventing the employee from working for a competitor, then the non-compete agreement can be successfully challenged.