Non-Compete Agreements in Business Sales (Part 2 of 3)

Non-Compete Agreements in Business Sales (Part 2 of 3)

Articles, Non-Compete Agreements, Small Business

Non-Competes for Employees and Independent Contractors

In the first article we talked about non-competes in the sale of a business. In a business sale, the non-compete must be separately purchased, i.e. the person who agrees not to compete must be paid directly for that commitment. But for employees (or independent contractors) no such “purchase” is necessary. In Missouri (as in most states) an employer may say “sign this non-compete agreement or you are fired;” and contrary to what many think, these agreements are valid. Repeat … they are enforceable.

If you, have a key employee (e.g. a sales manager), where do you think he/she will go after leaving your employment? That’s right, your biggest competitor and your customers. You have every right to protect your customers with a non-compete agreement designed to give you a legitimate unfettered right to keep a good relationship with your customers before a former employee tries to “steal” them.

But you say “it’s illegal to prevent someone from getting a job.” A non-compete agreement that is reasonable in time and distance is enforceable. So, what’s “reasonable” you ask? It depends on the employer’s geographic customer base. Let’s say that you sell shoes in St. Charles, Jefferson and St. Louis counties. Could you enforce a non-compete in those counties for the sale of shoes, i.e. prevent your former salesman from being employed as a shoe salesman in those counties? Yes, absolutely. Does it prevent your former salesmen from getting a shoe sales job outside of those three counties … no. Protecting your customer base in Missouri is not preventing your former employee from gainful employment under the law of non-competition.

Stay tuned for next article… The Contents of a Well Drafted Non-Competition Agreement.