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Missouri Appeals Court Holds that Employee Who Quits Rather Than Sign a Non-Compete Agreement Can Collect Unemployment

Unemployment benefits were designed to help those who lose their job through no fault of their own. As a result, most employers don’t expect former workers who resign their position to receive unemployment benefits, but a Missouri appellate court recently ruled that, in some instances, an employee who resigns can do just that.

The case that prompted the ruling was David Darr, a former life-insurance salesperson for Robertsville Marketing Group, based in Wentzville, MO. A few months after Darr began working for Robertsville, the company sent out a notice to all of the employees, telling them they would be required to sign a non-compete agreement as a condition of continued employment with the company.

A non-compete agreement is an agreement, usually included as part of an employment contract, in which the employee agrees not to work for a competitor of the employer. Noncompetes include a time limit, usually six months to a year, before the employee can work for any company. Geographical restrictions are also common, for example, within 50 miles of the employer’s headquarters. Darr refused to sign the agreement, saying that he wanted to consult an attorney first. He later resigned his position at Robertsville and applied for unemployment benefits.

The Missouri Labor and Industrial Relations Commission ruled that Darr was ineligible for unemployment benefits because he left his job voluntarily and without “good cause”. On appeal though, the Missouri Court of Appeals found that the non-compete agreement that Robertsville provided was in fact restrictive enough to meet the requirements for “good cause” for Darr to leave his job.

Although non-compete clauses are a common condition of employment, and are enforceable in most states, there are certain limits that will lead most courts to conclude that such a clause is unenforceable. Non-competes with an excessively long time limit or very large geographical area that doesn’t correspond to the area where the employee actually works are usually found to be unenforceable in a court of law. Such was allegedly the case with the non-compete that Roberstville required its employees to sign.

The agreement was nationwide and extended for six years. To sign such an agreement would have severely restricted Darr’s chances of finding employment outside of Robertsville. Furthermore, employees were allegedly only given only a week’s notice before they had to have the agreement signed or lose their job. One week is not enough time to review a contract and consult a lawyer. With all this in mind, the Missouri Court of Appeals ruled that Darr had good cause for leaving his job, and so he qualified for unemployment benefits.

As various attorneys around the country debate the implications of the new ruling, few are surprised by the court’s findings. David Knight, an attorney working in Kansas, pointed out that, “Missouri unemployment laws are construed to provide unemployment to unemployment applicants whenever possible”. He also noted that, “The court’s view that the noncompete [agreement] was unenforceable was a big factor.”

Regarding whether the case will have national ramifications, Knight admitted that it is possible. Although the decision was based on Missouri non-compete law and Missouri employment law, he adds that “the concept that an employee [can be] forced to resign rather than sign an overly broad agreement could catch on in other states, particularly in states such as California and North Dakota, where noncompetes are not enforceable.”The Chicago non-compete agreement attorneys at DiTommaso Lubin Austermuehle near Chicago and Elmhurst represent business owners and professionals regarding non-competition agreements, covenants not to compete, restrictive covenants and other claims throughout the Chicagoland area, including Hinsdale and Naperville; and in the Mid-West region, including Indiana, Wisconsin and Iowa. You can contact us by calling our toll free number (877) 990-4990 for a consultation or contact us online by filling out the form at the side of this blog.