LSO LEGAL SERVICES DIVISION • 200 West 24th Street • Cheyenne, Wyoming 82002
TELEPHONE (307)777-7881 • FAX (307)777-5466 • E-MAIL [email protected] • WEB SITE http://www.wyoleg.gov
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Joint Judiciary Committee
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Brian Fuller, Staff Attorney
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Topic Summary: Non-Compete Clauses
This summary provides background information on Wyoming law concerning the use of
non-compete clauses for employment purposes. This summary also includes information
on the laws of surrounding states for non-compete clauses.
Approved Interim Topic
Priority No. 5: Review of Non-Compete Clauses.
The Committee will review and discuss common law contracts and non-compete clauses.
Wyoming's Law on Non-Compete Clauses
Non-compete clauses, or covenants not to compete, are agreements where an employee
agrees not to enter into or engage in a similar profession or trade in competition against
the employer. These clauses may be limited by duration or geography (for example,
specifying that an employee agrees not to compete for a set period of time, or within a
certain geographic area based on the employer's location). Initially, non-compete clauses
were consistently found to be illegal restraints of trade that were contrary to public
policy.
1
As employment shifted from an apprenticeship system to an employee/employer
relationship, courts began considering whether non-compete clauses were reasonable.
2
1
Cathy Packer & Johanna Cleary, Rediscovering the Public Interest: An Analysis of the
Common Law Governing Post-Employment Non-Compete Contracts for Media
Employees, 24 Cardozo Arts & Ent. L.J. 1073, 1078 (2007).
2
Hopper v. All Pet Animal Clinic, 861 P.2d 531, 539.
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LSO LEGAL SERVICES DIVISION • 200 West 24th Street • Cheyenne, Wyoming 82002
TELEPHONE (307)777-7881 • FAX (307)777-5466 • E-MAIL lso@wyoleg.gov • WEB SITE http://www.wyoleg.gov
Non-compete clauses bring into conflict two principles: the freedom to contract, and the
freedom to work.
3
Thus, despite the "traditional disfavor" of non-compete clauses, courts
have upheld non-compete clauses when there is a proper balance between the competing
interests of an employer and employee.
4
Research revealed no specific Wyoming statute that addresses non-compete clauses for
employment purposes.
5
Per Wyoming case law, non-compete clauses or restrictions in
employment agreements are enforceable if the clause is: "(1) in writing; (2) part of a
contract of employment; (3) based on reasonable consideration; (4) reasonable in
durational and geographical limitations; and (5) not against public policy."
6
Courts in
Wyoming consider whether a non-compete clause is reasonable based upon the facts and
circumstances of a particular case.
7
The Wyoming Supreme Court has relied on a "useful
enumeration" of various factors courts can consider when determining the reasonableness
of a non-compete clause:
The considerations to be balanced are the degree of inequality in bargaining
power; the risk of the covenantee losing customers; the extent of respective
participation by the parties in securing and retaining customers; the good
faith of the covenantee; the existence of sources or general knowledge
pertaining to the identity of customers; the nature and extent of the business
position held by the covenantor; the covenantor's training, health,
education, and needs of his family; the current conditions of employment;
the necessity of the covenantor changing his calling or residence; and the
correspondence of the restraint with the need for protecting the legitimate
interests of the covenantee.
8
The Wyoming Supreme Court has held that non-compete agreements are upheld only if
"they are no wider than reasonably necessary for the protection of the employer's
business, and do not impose undue hardship on the employee, due regard being had to the
3
Id.
4
Id.
5
Wyoming statute references "anti-compete" agreements for purposes of performance
compensation paid to investment officers of the State Treasurer's Office and the
Wyoming Retirement System. See W.S. 9-1-409(e)(xi); 9-3-406(a)(xi). Wyoming law
also exempts covenants not to compete from property taxation. See W.S. 39-11-
105(b)(iv).
6
Hopper, 861 P.2d at 540.
7
Id.
8
Id. (quoting Philip G. Johnson & Co. v. Salmen, 317 N.W.2d 900, 904 (Neb. 1982)).
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LSO LEGAL SERVICES DIVISION • 200 West 24th Street • Cheyenne, Wyoming 82002
TELEPHONE (307)777-7881 • FAX (307)777-5466 • E-MAIL lso@wyoleg.gov • WEB SITE http://www.wyoleg.gov
interests of the public."
9
The Supreme Court has held the following in interpreting and
reviewing non-compete agreements:
• The Court held that a non-compete agreement that prohibited a veterinarian from
practicing for three years from termination within five miles of the city where she
worked was reasonable in part; the Court held that the three-year durational
requirement was an unreasonable restraint on trade but upheld the remaining
requirements for a one-year period.
10
• An agreement preventing a repairman from working in that trade for seven years
in the area of the former employer's business (spanning three counties) was
unreasonable. The Court concluded that there was no confidential information
imparted to the employee, and the employee didn't use any trade or confidential
information to solicit customers of the former employer. The Court found both the
geographical and durational restrictions unreasonable.
11
• An agreement where an employee agreed not to compete directly or indirectly
with his former business for three years and not to use any confidential
information was reasonable.
12
• The Court has noted that "the ability to narrow the term of a covenant not to
compete and enforce a reasonable restraint permits public policy to be served in
the most effective manner." Put another way, the Court can "enforce a narrower
term . . . without arbitrarily invalidating the entire agreement between the parties
and creating an uncertain business environment."
13
The Court has also addressed non-compete agreements in other contexts. The Court has
upheld a lifetime covenant where a husband agreed to not compete with a dry-cleaning
business that was awarded to his wife in a divorce.
14
The Court has also noted that non-
compete agreements ancillary to the sale of a business must also be reasonable, although
they are not "viewed in the same light" and "strictly construed" like non-compete
agreements in the employment context because the parties' bargaining positions are more
9
Ridley v. Krout, 180 P.2d 124, 127 (Wyo. 1947).
10
Hopper, 861 P.2d at 547. This holding was over the dissent of one justice, who would
have upheld the agreement as originally contemplated. Id. at 549 (Cardine, J., dissenting).
11
Ridley, 180 P.2d at 133.
12
CBM Geosolutions, Inc. v. Gas Sensing Tech. Corp., 2009 WY 113, ¶ 13, 215 P.3d
1054, 1059–60 (Wyo. 2009).
13
Hopper, 861 P.2d at 546.
14
Holland v. Holland, 35 P.3d 409, 414–15 (Wyo. 2001).
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LSO LEGAL SERVICES DIVISION • 200 West 24th Street • Cheyenne, Wyoming 82002
TELEPHONE (307)777-7881 • FAX (307)777-5466 • E-MAIL lso@wyoleg.gov • WEB SITE http://www.wyoleg.gov
likely to be equal.
15
In one case, the Court upheld an agreement that purchasers of land
entered into with the sellers (who operated a restaurant on an adjacent lot) where the
purchasers would not sell alcohol in the bowling alley that they planned to build.
16
The only restriction on non-compete agreements is in the Rules of Professional Conduct
governing lawyers in Wyoming; no lawyer shall participate in offering or making an
agreement that restricts the right of a lawyer to practice after termination of the
relationship (except for agreements concerning benefits upon retirement).
17
Non-Compete Agreements in Other States
Below is a summary of the laws of the states in the Tenth Circuit
Colorado
Colorado statute provides that any "covenant not to compete which restricts the right of
any person to receive compensation for performance of skilled or unskilled labor for any
employer shall be void."
18
This restriction does not apply to:
• Any contract for the purchase and sale of a business or the assets of a business.
• Any contract for the protection of trade secrets.
• Any contractual provision providing for recovery of the expense of educating and
training an employee who has served an employer for a period of less than two
years.
• "Executive and management personnel and officers and employees who constitute
professional staff to executive and management personnel."
19
Colorado statute also provides that any non-compete agreement between physicians that
restricts the right of a physician to practice medicine is void (but that part of any
15
Pope v. Rosenberg, 2015 WY 142, ¶¶ 16–17, 361 P.3d 824, 829 (Wyo. 2015). In this
case, the Court only interpreted the agreement's terms, not whether the agreement itself
was reasonable.
16
Oliver v. Quynn, 2013 WY 70, ¶¶ 26–28, 303 P.3d 1119, 1127–28 (Wyo. 2013).
17
Wyo. R. Prof. Conduct 5.6, available at https://www.courts.state.wy.us/wp-
content/uploads/2017/05/RULES-OF-PROFESSIONAL-CONDUCT-FOR-
ATTORNEYS-AT-LAW-8_05.pdf (page 97) (last visited May 17, 2021).
18
Colo. Rev. Stat. § 8-2-113(2).
19
Id.
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LSO LEGAL SERVICES DIVISION • 200 West 24th Street • Cheyenne, Wyoming 82002
TELEPHONE (307)777-7881 • FAX (307)777-5466 • E-MAIL lso@wyoleg.gov • WEB SITE http://www.wyoleg.gov
agreement is severable and enforceable).
20
Colorado courts have held that, except for the
"narrow exceptions" in the statute,
21
non-compete agreements are "facially void."
22
Even
if a non-compete agreement is not void because it meets one of the exceptions, the
agreement must still be reasonable as to both duration and geographic scope for it to be
valid and enforceable.
23
Colorado courts have reached the following holdings and
conclusions regarding this statute and non-compete agreements:
• A court has discretion to "reform" an unreasonable non-compete agreement "by
supplying the limitations of both duration and geographic scope."
24
• An agreement that is worldwide and perpetual is unduly broad and void.
25
• An agreement that would prevent a former employee from teaching swimming or
aquatic skills to children in any location in perpetuity was unreasonable and
unenforceable.
26
• Colorado courts leave the determination "management/executive" exception as a
question of fact for the trial court. Courts have noted that, under case law,
professional employees include those in the legal, engineering, scientific, and
medical fields, "together with their junior professional assistants."
27
Management
and executives are limited to those persons who are "professionals" and who
"primarily serve as key members of the manager's or executive's staff in the
implementation of management or executive functions."
28
• The statutory section concerning non-compete agreements also applies to
independent contractors.
29
Utah
In 2016, Utah enacted the Post-Employment Restrictions Act.
30
For non-compete
agreements entered into on or after May 10, 2016, non-compete agreements must be
20
Colo. Rev. Stat. § 8-2-113(3)(a).
21
DBA Enters. v. Findlay, 923 P.2d 298, 302 (Colo. Ct. App. 1996) ("Covenants not to
compete, with some narrow exceptions, are contrary to the public policy of Colorado and
are void.").
22
Mgmt. Recruiters of Boulder v. Miller, 762 P.2d 763, 765 (Colo. Ct. App. 1988).
23
Nat'l Graphics Co. v. Dilley, 681 P.2d 546, 547 (Colo. Ct. App. 1984).
24
Id.
25
Nutting v. Ram Southwest, Inc., 106 F. Supp. 2d 1121, 1126–27 (D. Colo. 2000).
26
Harvey Barnett, Inc. v. Schidler, 143 F. Supp. 2d 1247, 1255 (D. Colo. 2001).
27
Phoenix Capital, Inc. v. Dowell, 176 P.3d 835, 841 (Colo. Ct. App. 2007).
28
Id. at 842.
29
Colo. Supply Co. v. Stewart, 797 P.2d 1303, 1305 (Colo. Ct. App. 1990).
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LSO LEGAL SERVICES DIVISION • 200 West 24th Street • Cheyenne, Wyoming 82002
TELEPHONE (307)777-7881 • FAX (307)777-5466 • E-MAIL lso@wyoleg.gov • WEB SITE http://www.wyoleg.gov
limited to one year from the day on which the employee is no longer employed and must
follow any requirements imposed under common law.
31
Any agreement that violates this
act is void.
32
The act does not prohibit: (1) a reasonable severance agreement that
includes a non-compete agreement or (2) a non-compete agreement related to the sale of
a business (so long as the individual subject to the agreement receives value related to the
sale of the business).
33
Research revealed no Utah appellate-court case addressing this act. Under earlier case
law, Utah courts require non-compete agreements to be: (1) supported by consideration;
(2) negotiated in good faith; (3) necessary to protect the business's goodwill; and (4)
reasonable in duration and geographic scope.
34
Utah courts will only enforce non-
compete agreements if they are "carefully drawn to protect only the legitimate interests of
the employer."
35
Utah courts have held as follows in terms of geographic limitations
concerning non-compete agreements:
• An agreement with no specific geographic restriction was reasonable where the
employer was a cable company with customers nationwide, and the specific
restrictions on the former employee's activities were reasonable to protect the
employer's interest.
36
• An agreement with a two-mile geographic restriction was reasonable; the
employer was a small pharmacy, and the agreement was limited to five years.
37
• An agreement that limited a former multi-level marketing employee from working
for any other network marketing companies anywhere in the world for three years
was unenforceable.
38
30
Utah Code § 34-51-101; 2016 Utah Session Laws, Ch. 153.
31
Utah Code § 34-51-201(1).
32
Id. Separate language addresses non-compete agreements between a broadcasting
company and broadcasting employee.
33
Utah Code § 34-51-202.
34
Allen v. Rose Park Pharmacy, 237 P.2d 823, 828 (Utah 1951).
35
Robbins v. Finlay, 645 P.2d 623, 627 (Utah 1982).
36
System Concepts v. Dixon, 669 P.2d 421, 427 (Utah 1983).
37
Rose Park Pharmacy, 237 P.23d at 828.
38
Tahitian Noni Int'l, Inc. v. Dean, No. 2:09-CV-51-TS, 2009 U.S. Dist. LEXIS 5671, at
*9–11 (D. Utah Jan. 26, 2009) (unpublished).
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LSO LEGAL SERVICES DIVISION • 200 West 24th Street • Cheyenne, Wyoming 82002
TELEPHONE (307)777-7881 • FAX (307)777-5466 • E-MAIL lso@wyoleg.gov • WEB SITE http://www.wyoleg.gov
Kansas
Research revealed no statute governing non-compete agreements in employment.
Generally, a non-compete agreement "is valid and enforceable if the restraint is
reasonable under the circumstances and not adverse to the public welfare."
39
Kansas
courts determine the reasonableness of a non-compete agreement by considering whether
the agreement: (1) protects a legitimate business interest; (2) imposes an undue burden on
the employee; (3) injures the public; or (4) includes reasonable durational and geographic
restrictions.
40
Kansas courts have held the following concerning non-compete
agreements:
• An agreement that restricted a physician from engaging in the practice of medicine
in a single county for three years was reasonable and enforceable.
41
• An agreement that restricted a physician from engaging in the practice of medicine
within 75 miles of Wichita for two years after employment was reasonable.
42
• An agreement that prevented a franchisee from engaging in the business of
income-tax preparation anywhere for five years after the franchise agreement was
terminated was unreasonable because of the unlimited geographical scope.
43
New Mexico
Generally, there is no statute in New Mexico for non-compete agreements. But the New
Mexico Legislature enacted a statute concerning non-compete agreements for healthcare
practitioners. A non-compete provision in an agreement that restricts the right of a
healthcare practitioner to provide "clinical health care services" in New Mexico is
unenforceable upon the termination of: (1) the agreement; (2) a renewal or extension of
the agreement; or (3) a practitioner's employment with a party seeking to enforce the
agreement.
44
39
Weber v. Tillman, 913 P.2d 84, 89 (Kan. 1996).
40
Id. at 90; Idbeis v. Wichita Surgical Specialists, P.A., 112 P.3d 81, 87 (Kan. 2005).
41
Wichita Clinic, P.A. v. Louis, 185 P.3d 946, 954–56 (Kan. Ct. App. 2008).
42
Idbeis, 112 P.3d at 90–93.
43
H&R Block, Inc. v. Lovelace, 493 P.2d 205, 212–13 (Kan. 1974).
44
N.M. Stat. § 24-1I-2(A). An agreement is also void if it makes the agreement subject to
another state's laws or requires any litigation to be conducted in another state. N.M. Stat.
§ 24-1I-2(B).
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LSO LEGAL SERVICES DIVISION • 200 West 24th Street • Cheyenne, Wyoming 82002
TELEPHONE (307)777-7881 • FAX (307)777-5466 • E-MAIL lso@wyoleg.gov • WEB SITE http://www.wyoleg.gov
For other non-compete agreements, New Mexico courts will find them enforceable if
they are reasonable.
45
Specifically, courts consider whether the agreements: (1) have
sufficient consideration; (2) contain restrictions no larger or wider than necessary to
protect the employer's interest; and (3) are not against public policy.
46
Further, any
detriment to the public interest and any possible loss of services that the employee could
otherwise provide must be offset by the public benefit arising out of the preservation of
the freedom to contract.
47
New Mexico courts have held the following concerning non-
compete agreements:
• An agreement prohibiting an employee from engaging in dry-cleaning or laundry
services for one year in the city of employment or any other city where the
employee served the employer was reasonable.
48
• A lease agreement that prohibited the lessees from establishing a competing
business within two miles was valid and enforceable.
49
• An agreement that precluded a dentist from performing dentistry within 100 miles
of any of the employer's locations for one year was unreasonable, but the trial
court's amendment of the geographic scope to 30 miles made the agreement
reasonable and enforceable.
50
Oklahoma
Generally, Oklahoma statute prohibits non-compete agreements but also more broadly
voids any contract that restrains one from exercising a lawful profession:
Every contract by which any one is restrained from exercising a lawful
profession, trade or business of any kind, otherwise than as provided by
Sections 218 and 219 of this title, or otherwise than as provided by Section
2 of this act, is to that extent void.
51
45
Insure N.M., LLC v. McGonigle, 995 P.2d 1053, 1059 (N.M. Ct. App. 2000).
46
Nichols v. Anderson, 92 P.2d 781, 782–84 (N.M. 1939).
47
Lovelace Clinic v. Murphy, 417 P.2d 450, 453–54 (N.M. 1966).
48
Nichols, 92 P.2d at 785.
49
Winrock Enters. v. House of Fabrics, 579 P.2d 787, 789–90 (N.M. 1978).
50
Kidskare, PC v. Mann, 350 P.3d 1228, 1231–33 (N.M. Ct. App. 2015).
51
15 Okla. Stat. § 217. Section 218 of this title provides an exception for restraints
associated with the sale of goodwill of a business; section 219 provides an exception for
the dissolution of a partnership where the partners can agree that none of them will carry
on a similar business in a specified county.
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LSO LEGAL SERVICES DIVISION • 200 West 24th Street • Cheyenne, Wyoming 82002
TELEPHONE (307)777-7881 • FAX (307)777-5466 • E-MAIL lso@wyoleg.gov • WEB SITE http://www.wyoleg.gov
Oklahoma courts have noted that this statute has its genesis in the principle that "a
promise is unenforceable if the interest in its enforcement is outweighed by a public
policy harmed by enforcement of the agreement"—here, an unreasonable restraint on
trade.
52
The Oklahoma Supreme Court has stated that the statute above "was adopted for
the protection of individuals engaged in lawful professions, trades, and business, and for
the benefit of the public."
53
Oklahoma law has an exception that a former employee cannot directly solicit the sale of
goods or services from the former employer's established customers.
54
That statute,
Section 219A of Title 15, provides:
A person who makes an agreement with an employer, whether in writing or
verbally, not to compete with the employer after the employment
relationship has been terminated, shall be permitted to engage in the same
business as that conducted by the former employer or in a similar business
as that conducted by the former employer as long as the former employee
does not directly solicit the sale of goods, services or a combination of
goods and services from the established customers of the former employer.
Any provision in a contract between an employer and employee in conflict
with the provisions of this section shall be void and unenforceable.
55
There is little case law concerning this provision. In one case, the Oklahoma Supreme
Court held that a non-compete agreement that prohibited an employee from accepting
employment with any oil-and-gas company in the United States that generated 5% of its
revenue from nitrogen generation for two years was unenforceable under Section 219A.
56
But the United States Supreme Court reversed after concluding that the question of the
agreement's validity was one for an arbitrator to first decide; the agreement the employee
signed included an arbitration clause that the Oklahoma Supreme Court determined was
valid.
57
Oklahoma courts have struck down non-compete agreements as violating Section
219A as follows:
52
Cohen Realty, Inc. v. Marinick, 817 P.2d 747, 749 (Okla. Civ. App. 1991).
53
Neil v. Pa. Life Ins. Co., 474 P.2d 961, 963 (Okla. 1970).
54
15 Okla. Stat. § 219A.
55
Id.
56
Howard v. Nitro-Lift Techs., LLC, 273 P.3d 20, 28–29 (Okla. 2011).
57
Nitro-Lift Techs., LLC v. Howard, 568 U.S. 17, 19–21 (2012).
• PAGE 10 OF 10
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LSO LEGAL SERVICES DIVISION • 200 West 24th Street • Cheyenne, Wyoming 82002
TELEPHONE (307)777-7881 • FAX (307)777-5466 • E-MAIL lso@wyoleg.gov • WEB SITE http://www.wyoleg.gov
• An agreement that prohibited an employee from soliciting past clients (not just
"established customers") was unenforceable.
58
• An agreement a proprietor entered into with the purchaser of a propane business
the proprietor sold (and later went to work for as an employee) was valid; the
agreement required the proprietor not to engage in the propane business in a four-
county area for 15 years.
59
This summary provides a broad overview of the laws concerning non-compete
agreements for employers and employees in Wyoming and the other states in the Tenth
Circuit. Please let me know if you have any questions or need further information.
58
Autry v. Acosta, Inc., 410 P.3d 1017, 1024 (Okla. Civ. App. 2017).
59
Inergy Propane, LLC v. Lundy, 219 P.3d 547, 559–61 (Okla. Civ. App. 2008).
