Employee Non-Compete Agreement and Enforceability Memo — Kansas

KANSAS Employee Non-Compete Agreement and Enforceability Memo

Quick-Reference Summary

Part A — Enforceability Memo

MEMORANDUM

To: [________________________________]
From: [________________________________], Kansas Bar No. [_____]
Date: [__/__/____]
Re: Enforceability of Non-Compete Under Kansas Common Law — [EMPLOYEE NAME]

I. Executive Summary

Kansas has no general non-compete statute. The enforceability of the attached covenant is governed by Kansas common law as set forth in Weber v. Tillman, 259 Kan. 457, 913 P.2d 84 (1996) and Idbeis v. Wichita Surgical Specialists, P.A., 279 Kan. 755, 112 P.3d 81 (2005). Kansas courts generally enforce reasonable non-competes ancillary to lawful contracts but strictly construe them against the employer.

Bottom-line assessment: ☐ Likely enforceable as drafted ☐ Likely enforceable after judicial modification ☐ Insufficient consideration risk ☐ Voidable — redraft recommended

II. Threshold Requirements (Weber)

A non-compete must be:

1. Reasonable under the circumstances;
2. Not adverse to the public welfare;
3. Supported by consideration; and
4. Ancillary to an otherwise lawful contract.

III. Four-Factor Reasonableness Test (Idbeis)

IV. Consideration Analysis

This case: [☐ Initial hire ☐ Mid-employment with [bonus/raise/equity/promotion] ☐ Mid-employment continued employment only]. Assessment: [________________________________].

V. "Sole Purpose" Limitation

Idbeis holds that if the sole purpose of the covenant is to avoid ordinary competition (rather than protect a specific business interest), it is unreasonable and unenforceable. The Agreement should articulate clearly the specific protectable interests at stake.

VI. Judicial Modification

Kansas has not formally adopted the "blue pencil" doctrine, but Kansas courts attempt to "sustain the legality of contracts in whole or in part when fairly entered into, if reasonably possible," and have whittled back unreasonable geographic scopes or activity scopes. Include a clear severability and modification clause requesting the court to enforce the maximum reasonable scope.

VII. Physician Non-Competes (Idbeis)

Idbeis upheld restrictive covenants against cardiothoracic surgeons, finding the medical employer had a legitimate business interest in referral sources/patterns and that an AMA ethics opinion does not impose stricter requirements than Kansas common law. Liquidated-damages provisions are not required. Public-welfare prong is evaluated but did not bar enforcement on the Idbeis facts. Note: Recent commentary suggests Kansas physician non-competes may face increased scrutiny under FTC rule and changing public policy.

VIII. Attorney Carve-Out

Kansas Rule of Professional Conduct 5.6 prohibits any agreement that restricts a lawyer's right to practice after termination of the relationship (except retirement benefits). Confirm Employee is not a Kansas-licensed attorney.

IX. Federal Overlay

FTC Non-Compete Rule, 16 C.F.R. Part 910 — verify status before relying.

X. Recommendation

☐ Execute as drafted
☐ Modify before execution: [________________________________]
☐ Provide additional consideration before execution to satisfy Puritan-Bennett/Evco
☐ Do not execute

Part B — Non-Compete Agreement

EMPLOYEE NON-COMPETITION AGREEMENT
(Governed by Kansas Law)

This Agreement is entered into as of [__/__/____] between [EMPLOYER LEGAL NAME], a [STATE] [ENTITY TYPE] with its principal place of business at [________________________________] ("Company"), and [EMPLOYEE NAME] residing at [________________________________] ("Employee").

1. Recitals

Company is engaged in [________________________________] ("Business"). Employee will receive or has received: ☐ Initial offer of employment ☐ Promotion to [_____] ☐ Compensation increase of $[_____] ☐ Sign-on bonus of $[_____] ☐ Equity grant of [_____] ☐ Access to Confidential Information and customer goodwill.

2. Independent Consideration

Employee acknowledges that the consideration above is independent and bargained-for, and is provided specifically in exchange for the restrictive covenants in this Agreement. The parties intend this consideration to satisfy Kansas common-law requirements including Puritan-Bennett Corp. v. Richter, 8 Kan. App. 2d 311, 657 P.2d 589 (1983), and Evco Distrib., Inc. v. Brandau, 6 Kan. App. 2d 53, 626 P.2d 1192 (1981).

3. Definitions

4. Legitimate Business Interests Protected

Company has invested in and protects the following interests: ☐ Customer goodwill ☐ Trade secrets ☐ Confidential business and pricing information ☐ Employee training ☐ Referral sources/patterns (if applicable) ☐ Other: [_____].

5. Non-Competition Covenant

During the Restricted Period and within the Restricted Territory, Employee shall not engage in the Restricted Business in a capacity substantially similar to Employee's role with Company.

6. Customer Non-Solicitation

During the Restricted Period, Employee shall not solicit or accept business from any Customer for the purpose of providing competing services.

7. Employee Non-Solicitation

During the Restricted Period, Employee shall not solicit, recruit, or hire any then-current Company employee with whom Employee worked in the final 12 months.

8. Confidentiality

Employee shall hold Confidential Information in trust and shall not use or disclose it except for Company's benefit. Trade-secret protections survive indefinitely under the Kansas Uniform Trade Secrets Act.

9. Reasonableness Acknowledgment

Employee acknowledges that the duration, geographic scope, and scope of activity are: (a) reasonable; (b) necessary to protect Company's legitimate business interests; (c) not unduly burdensome on Employee; and (d) not adverse to the public welfare, consistent with Weber v. Tillman, 259 Kan. 457 (1996) and Idbeis v. Wichita Surgical Specialists, P.A., 279 Kan. 755 (2005).

10. Judicial Modification

If a court finds any restriction unreasonable as to time, territory, or scope, the parties request that the court enforce this Agreement to the maximum extent that is reasonable and not adverse to the public welfare. The parties intend Kansas courts to sustain enforceability of this Agreement in whole or in part where reasonably possible (Idbeis, Syllabus ¶ 5).

11. Remedies

Employee acknowledges that breach causes irreparable harm not adequately remediable by money damages. Company is entitled to seek temporary, preliminary, and permanent injunctive relief, in addition to damages and attorneys' fees as permitted by law.

12. Governing Law and Venue

This Agreement is governed by Kansas law. Exclusive venue lies in the District Court of [______] County, Kansas, or the U.S. District Court for the District of Kansas.

13. Severability, Survival, Integration

Unenforceable provisions are severable. Sections 5–11 survive termination.

SIGNATURES

Part C — Pre-Signing Checklist

☐ Legitimate business interest identified and articulated (not "ordinary competition")
☐ Duration ≤ 24 months absent specialized facts
☐ Geography tied to actual area of Employee's services
☐ Scope of activity narrowed to competing activity
☐ Initial-hire consideration: offer of employment is sufficient
☐ Mid-employment: independent consideration provided (raise / bonus / promotion / equity / new access to Confidential Information) per Puritan-Bennett / Evco
☐ Continued at-will employment alone NOT relied upon as consideration for mid-employment covenants
☐ Confirmed Employee is not a Kansas-licensed attorney (Rule 5.6 prohibits)
☐ Public-welfare considerations evaluated (especially healthcare, professionals)
☐ Modification/judicial-revision clause included
☐ Companion non-solicit and confidentiality agreements in place
☐ Kansas Uniform Trade Secrets Act protections referenced
☐ FTC Non-Compete Rule status verified
☐ Employee given reasonable opportunity to consult counsel
☐ Choice of law: Kansas; venue: Kansas
☐ Signed copies retained in personnel file

Sources and References

• Weber v. Tillman, 259 Kan. 457, 913 P.2d 84 (1996)
• Idbeis v. Wichita Surgical Specialists, P.A., 279 Kan. 755, 112 P.3d 81 (2005) — https://kscourts.gov/Cases-Decisions/Decisions/Published/Idbeis-v-Wichita-Surgical-Specialists-P-A
• Puritan-Bennett Corp. v. Richter, 8 Kan. App. 2d 311, 657 P.2d 589 (1983)
• Evco Distrib., Inc. v. Brandau, 6 Kan. App. 2d 53, 626 P.2d 1192 (1981)
• Eastern Distrib. Co. v. Flynn, 222 Kan. 666, 567 P.2d 1371 (1977)
• Kansas Uniform Trade Secrets Act, K.S.A. § 60-3320 et seq.
• Kan. R. Prof'l Conduct 5.6 (attorney non-competes prohibited)
• Spencer Fane, "Non-compete Laws: Kansas" — https://www.spencerfane.com/wp-content/uploads/2017/06/PLC-Non-compete-Laws_Kansas.pdf
• Hinkle Law Firm, "Goodbye to Physician Non-Competes in Kansas?" — https://www.hinklaw.com/blog/goodbye-to-physician-non-competes-in-kansas/
• FTC Non-Compete Rule, 16 C.F.R. Part 910