Will a Kansas court enforce the non-compete in our agreement?
Yes, if it is reasonable: on a four-factor reasonableness test, and an overbroad covenant is reformed rather than struck. Weber v. Tillman states the governing proposition: "A noncompetition covenant ancillary to an employment contract is valid and enforceable if the restraint is reasonable under the circumstances and not adverse to the public welfare", and two limits on it: "If the sole purpose is to avoid ordinary competition, it is unreasonable and unenforceable", and "noncompetition covenants included in employment contracts are strictly construed against the employer." In Weber v. Tillman the Supreme Court set out the test: "The analysis of whether the noncompetition clause is reasonable evaluates these factors: (1) Does the covenant protect a legitimate business interest of the employer? (2) Does the covenant create an undue burden on the employee? (3) Is the covenant injurious to the public welfare? (4) Are the time and territorial limitations contained in the covenant reasonable? The determination of reasonableness is made on the particular facts and circumstances of each case.", and said that "only a legitimate business interest may be protected by a noncompetition covenant." Weber enforced the covenant in front of it: "We are required to enforce the noncompetition covenant and affirm the trial court's grant of an injunction." The statute states a reasonableness rule of its own as well - an arrangement, contract, agreement, trust, understanding or combination is not unlawful under the Kansas restraint of trade act "if such restraint is reasonable in view of all of the facts and circumstances of the particular case and does not contravene public welfare" (K.S.A. 50-163(c)(1)). By statute, if a covenant that is not presumed enforceable under K.S.A. 50-163(c) is determined to be overbroad or otherwise not reasonably necessary to protect a business interest of the business entity seeking enforcement, "the court shall modify the covenant, enforce the covenant as modified and grant only the relief reasonably necessary to protect such interests" (K.S.A. 50-163(b)).
The trap
The conclusive presumptions in K.S.A. 50-163(c) are about NON-SOLICITATION, not about non-competition. Subsections (c)(2) and (c)(3) cover an owner's covenant not to solicit the entity's employees or owners, and not to solicit its material contact customers, each presumed enforceable if it runs no more than four years after the owner's business relationship ends; subsections (c)(4) and (c)(5) cover an employee's covenant not to solicit employees or owners: presumed enforceable if it seeks to protect confidential or trade secret business information or customer or supplier relationships, goodwill or loyalty, or does not continue more than two years, and not to solicit material contact customers, presumed enforceable if limited to material contact customers and no longer than two years. Subsection (c)(7) preserves any defence available at law or in equity notwithstanding those presumptions. The mandatory-modification sentence does not stand alone either: the subsection it sits in opens "Except as otherwise provided in subsections (d) and (e)", and subsection (e) is where covenants not to compete are taken out of the act, so the promise of reformation and the exclusion of non-competes pull against each other on the face of the section. And the statute points the other way for the covenant itself: K.S.A. 50-163(e)(6) provides that the Kansas restraint of trade act "shall not be construed to apply to ... any franchise agreements or covenants not to compete." The restraint of trade act also does not reach every organisation: § 50-163(e) excludes a cooperative-marketing association under article 16 of chapter 17; an association, trust, agreement or arrangement governed by the federal Capper-Volstead act; a corporation organized under the Kansas electric cooperative act or which becomes subject to it, together with any limited liability company or corporation, or wholly owned subsidiary, providing electric service at wholesale in Kansas that is owned by four or more Kansas retail electric cooperatives, and any member-owned corporation formed prior to 2004; a credit union under article 22 of chapter 17; and an arrangement governed by the packers and stockyards act. A covenant given inside one of those structures is outside the act, whatever the Weber factors would say.
14 authorities
The words that state the rule
A noncompetition covenant ancillary to an employment contract is valid and enforceable if the restraint is reasonable under the circumstances and not adverse to the public welfare.
The words that state the rule
The analysis of whether the noncompetition clause is reasonable evaluates these factors: (1) Does the covenant protect a legitimate business interest of the employer? (2) Does the covenant create an undue burden on the employee? (3) Is the covenant injurious to the public welfare? (4) Are the time and territorial limitations contained in the covenant reasonable? The determination of reasonableness is made on the particular facts and circumstances of each case.
The words that state the rule
The rationale for enforcing a noncompetition covenant is based on the freedom of contract. See Francis v. Schlotfeldt, 10 Kan. App. 2d 517, 518 , 704 P.2d 381 (1985). However, it is well settled that only a legitimate business interest may be protected by a noncompetition covenant. If the sole purpose is to avoid ordinary competition, it is unreasonable and unenforceable. Eastern Distributing, 222 Kan. at 671 ; see EVCO Distributing, 6 Kan. App. 2d 53 , Syl. ¶ 5. Additionally, noncompetition covenants included in employment contracts are strictly construed against the employer.
- statuteK.S.A. 50-163enactment date not established
The words that state the rule
(b) Except as otherwise provided in subsections (d) and (e), the Kansas restraint of trade act shall be construed in harmony with ruling judicial interpretations of federal antitrust law by the United States supreme court. If such judicial interpretations are in conflict with or inconsistent with the express provisions of subsection (c), the provisions of subsection (c) shall control. If a covenant that is not presumed to be enforceable pursuant to subsection (c) is determined to be overbroad or otherwise not reasonably necessary to protect a business interest of the business entity seeking enforcement of the covenant, the court shall modify the covenant, enforce the covenant as modified and grant only the relief reasonably necessary to protect such interests.
- statuteK.S.A. 50-163enactment date not established
The words that state the rule
A covenant in writing in which an employee agrees not to solicit, recruit, induce, persuade, encourage, direct or otherwise interfere with, directly or indirectly, a business entity's customers, including any reduction, termination, acceptance or transfer of any customer's business, in whole or in part, for the purpose of providing any product or service that is competitive with those provided by the employer shall be conclusively presumed to be enforceable and not a restraint of trade if the covenant is limited to material contact customers and the covenant is between an employer and an employee and does not continue for more than two years following the end of the employee's employment with the employer.
- statuteK.S.A. 50-163enactment date not established
The words that state the rule
Notwithstanding the presumption of enforceability provided in subsections (c)(2) through (c)(5), an employee or owner shall be permitted to assert any applicable defense available at law or in equity for the court's consideration in a dispute regarding a written covenant.
- statuteK.S.A. 50-163enactment date not established
The words that state the rule
"Material contact customer" means any customer or prospective customer that is solicited, produced or serviced, directly or indirectly, by the employee or owner at issue or any customer or prospective customer about whom the employee or owner, directly or indirectly, had confidential business or proprietary information or trade secrets in the course of the employee's or owner's relationship with the customer.
- statuteK.S.A. 50-163enactment date not established
The words that state the rule
(e) The Kansas restraint of trade act shall not be construed to apply to: (1) Any association that complies with the provisions and application of article 16 of chapter 17 of the Kansas Statutes Annotated, and amendments thereto, the cooperative marketing act; (2) any association, trust, agreement or arrangement that is governed by the provisions and application of 7 U.S.C. § 291 et seq., the Capper-Volstead act; (3) any corporation organized under the electric cooperative act, K.S.A. 17-4601 et seq., and amendments thereto, or which becomes subject to the electric cooperative act in any manner therein provided; or any limited liability company or corporation, or wholly owned subsidiary thereof, providing electric service at wholesale in the state of Kansas that is owned by four or more electric cooperatives that provide retail service in the state of Kansas; or any member-owned corporation formed prior to 2004; (4) any association that is governed by the provisions and application of article 22 of chapter 17 of the Kansas Statutes Annotated, and amendments thereto, the credit union act;
- statuteK.S.A. 50-163enactment date not established
The words that state the rule
(2) A covenant in writing in which an owner agrees to not solicit, recruit, induce, persuade, encourage, direct or otherwise interfere with, directly or indirectly, one or more employees or owners of a business entity for the purpose of interfering with the employment or ownership relationship of such employees or owners shall be conclusively presumed to be enforceable and not a restraint of trade if the covenant is between a business entity and an owner of the business entity and the covenant does not continue for more than four years following the end of the owner's business relationship with the business entity.
- statuteK.S.A. 50-163enactment date not established
The words that state the rule
(3) A covenant in writing in which an owner agrees to not solicit, induce, persuade, encourage, service, direct or otherwise interfere with, directly or indirectly, a business entity's customers, including any reduction, termination, acceptance or transfer of any customer's business, in whole or in part, for the purpose of providing any product or service that is competitive with those provided by the business entity shall be conclusively presumed to be enforceable and not a restraint of trade if the covenant is limited to material contact customers and the covenant does not continue for more than four years following the end of the owner's business relationship with the business entity.
- statuteK.S.A. 50-163enactment date not established
The words that state the rule
(4) A covenant in writing in which an employee of a business entity agrees to not solicit, recruit, induce, persuade, encourage, direct or otherwise interfere with, directly or indirectly, one or more employees or owners of a business entity for the purpose of interfering with the employment or ownership relationship of such employees or owners shall be conclusively presumed to be enforceable and not a restraint of trade if the covenant is between an employer and one or more employees and the covenant: (A) Seeks, on the part of the employer, to protect confidential or trade secret business information or customer or supplier relationships, goodwill or loyalty; or (B) does not continue for more than two years following the employee's employment.
- statuteK.S.A. 50-163enactment date not established
The words that state the rule
(5) any association, trust, agreement or arrangement that is governed by the provisions and application of 7 U.S.C. § 181 et seq., the packers and stockyards act; and (6) any franchise agreements or covenants not to compete.
- statuteK.S.A. 50-163enactment date not established
The words that state the rule
(c) (1) An arrangement, contract, agreement, trust, understanding or combination shall not be deemed a trust pursuant to the Kansas restraint of trade act and shall not be deemed unlawful, void, prohibited or wrongful under any provision of the Kansas restraint of trade act if that arrangement, contract, agreement, trust, understanding or combination is a reasonable restraint of trade or commerce. An arrangement, contract, agreement, trust, understanding or combination is a reasonable restraint of trade or commerce if such restraint is reasonable in view of all of the facts and circumstances of the particular case and does not contravene public welfare.
The words that state the rule
We are required to enforce the noncompetition covenant and affirm the trial court’s grant of an injunction.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.