Changes in Missouri Law Regarding Restrictive Covenants in Business Sales

Authored by Ruth Binger with assistance from Kristina M. Stevenson, contributor

Recent changes in Missouri law have impacted the enforceability of restrictive covenants in the sale of businesses, particularly those involving business entities and owners. These modifications, detailed in Revised Statutes of Missouri (RSMo) 431.204, arguably reduce protections extended to business purchasers.

Effective August 28, 2023, a covenant prohibiting solicitation of employees between a business entity and an owner cannot extend beyond a two-year period following the termination of the owner’s affiliation with the entity. Essentially, this means that after two years from the sale of their business, an owner is permitted to solicit employees previously associated with the entity.

Moreover, the revisions have introduced more stringent conditions for covenants prohibiting the solicitation of customers. These non-solicitation covenants must now be limited to customers with whom the owner had prior dealings and cannot extend beyond five years after the owner’s termination of business ties with the entity. This adjustment opens the door for sellers to solicit customers they had not previously interacted with.

It is important to note that while these changes primarily focus on covenants concerning employee and customer solicitation, the statute specifies that other types of restrictive covenants, such as non-compete agreements and nondisclosure or confidentiality agreements, remain unaffected by the revisions. Nevertheless, questions may arise regarding how the revisions will interact with the time and scope limitations on non-compete covenants.

It is essential for both current and prospective business owners to understand the nuances of the revised statute. Seeking expert advice is advisable to ensure agreements are compliant under Missouri law.

Authored by Attorney Ruth Binger with assistance from Sarah L. Ayers, law clerk. Binger serves both emerging and mature businesses concentrating in corporate law, intellectual property and technology law, cybersecurity, digital media law, and labor and employment law. Her commitment to the success of small to medium-sized businesses, and her understanding of multi-faceted issues inherent in operations, are what distinguish Binger’s practice. Stevenson, law clerk, is a student at Saint Louis University School of Law and a graduate of  Saint Louis University.