Posted by: Robert Markette
September 08, 2006

A few months ago, I mentioned a Missouri Court of Appeals case that seemed to undermine the enforceability of non-competes in that state. I also mentioned that the case was on its way to the Missouri Supreme Court and that could result in a reversal.

As you may have read in Private Duty Insider or another trade publication, the Missouri Supreme Court issued its opinion in this case. In the opinion, the Court upheld the enforceability of non-competes under Missouri law. For those of you who missed this case, the case arises out of the actions by two former employees of a home health agency who went to work for a competitor. The employees engaged in a number of activities, including recruiting employees whom the managed at their former job.

The Court discusses non-competes under Missouri law at some length, but the most interesting part of the discussion centers on customer relationships and trade secrets. The Court specifically mentions that Missouri law allows for the enforcement of non-compete agreements when necessary to protect trade secrets and customer contacts. Both of these terms have specific definitions under Missouri law.

For purposes of trade secrets, as I have said on numerous occasions, simply calling a piece of information, a process, or a customer list a trade secret is insufficient. As in many jurisdictions, Missouri requires the party claiming trade secret protection to show a number of things. One of the key requirements is that you have undertaken efforts to maintain the secrecy of the information. Many an employer has discovered that what they thought was a trade secret was not, because they took no efforts to protect it. Every state has a test for determining trade secret status. You shouldnt just assume your customer lists are protected trade secrets, if you do, you may find you have no protection at all.

As for customer contacts, the Missouri court recognized the necessity of enforcing non-compete agreements as a means of protecting these relationships. The Court defined customer contacts as the influence an employee acquires over his employers customers through personal contact.

In this case, the employees conceded that in the home health industry a provider has an expectation of continued service to an individual patient until the patient no longer qualifies for services or dies. The employees also admitted that patients will follow their caregivers from agency to agency. The employees were simply conceding what everybody in the home health and hospice industries know, for direct care staff, your employees have a very high level of influence over your patients.

The defendants in this case were management employees, not direct care staff. The court noted, however, that the two former managers were in a position, due to their knowledge of the former employers salary structure and their relationships with the direct care staff, to recruit their former employers employees in order to raid their former employers patients. In effect, they werent stealing the patients, but stealing the patients care givers with the knowledge as conceded above, that that the patients would follow the caregivers.
Recruiting employees to obtain clients is one way competitors attempt to avoid the non-compete. In this case, the court recognized the effort for what it was and enforced the non-compete agreement any way. This reinforces that you should have non-compete agreements with even your management staff and they should address employee recruitment.

One last point of interest, the former employees counter sued for interference with a business expectancy. If you sue to enforce a non-competition agreement, you should assume this type of counter claim will be filed. In this case, the Missouri Court recognized that a company is justified in attempting to enforce the non-compete agreements it has with its employees. Because they were justified and acting in good faith, the employer had no liability.

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