Tuesday, September 1, 2009
Kansas Court Takes Broad View of Protectable Customer Relationships (Fee Insurance Group v. Martin)
A recent appellate decision out of Kansas illustrates the importance of analyzing the permissible breadth of protectable interests under non-compete law.
As I've written before, states vary widely in their application of the general rule that non-competes - to be valid - must support a protectable (or, legitimate) business interest. In Kansas, a protectable interest can include "customer contacts." In Fee Insurance Group v. Martin, the employee (an insurance sales representative) signed a one-year non-compete clause that prohibited him from competing for any customer belonging to Fee Insurance Group at the time his employment ended.
In many states (Illinois, for one), this clause arguably would be overbroad and invalid as extending beyond an employer's legitimate business interest. Martin, in fact, argued as such, reasoning that the prohibition could not extend to all 4,500 of his ex-employer's accounts. (He tacitly conceded that those accounts with whom he had a relationship were proper subjects of a valid non-compete clause).
The Kansas court, however, had little trouble in rejecting Martin's argument. Its court precedent allows employers to draft customer non-compete (or non-solicit) clauses to protect all customer relationships, not just those the employer facilitated or cultivated.
Court: Court of Appeals of Kansas
Opinion Date: 8/14/09
Cite: Fee Insurance Group v. Martin, 2009 Kan. App. Unpub. LEXIS 620 (Kan. Ct. App. Aug. 14, 209)