Non-Competition Agreements in Montana

Non-competition agreements, also known as covenants not to compete or restrictive covenants, are employment contracts used by employers to limit the ability of an employee to compete with the employer by stealing customers or trade secrets. Enforceable agreements must strike a balance between protecting the employer's legitimate business interests from an unfair competitive advantage with the employee's right to work in a field for which he or she is trained.  In general, courts decide what is considered reasonable or not reasonable by examining the type and size of the business, how long and over what geographic area the restrictions apply and whether adequate consideration, or benefit, was given the employee at the time the agreement was signed.

The Law In Montana

By statute in Montana "Any contract by which anyone is restrained from exercising a lawful profession, trade, or business of any kind ... is to that extent void."  The only exceptions are for situations in which the good will of a business is being sold or when a partnership is being dissolved.  However, Montana courts have interpreted this statute as rendering non-competition agreements unenforceable only when they prohibit an employee from practicing a profession, trade or business that is in competition with the former employer.  Restrictions that simply deter competition and that meet a three-part test may be determined to be enforceable.  In determining enforceability, the courts examine:

• whether there is a limitation at to time or place; if there is neither, the agreement will be unenforceable;
• whether the agreement was based on some good consideration; and
• whether the agreement provides reasonable protection for and does not impose an unreasonable burden upon the employer, the employee or the public.