Chapter 21: Case Problem #5

Holmes' role as president of After-School Care Corp. might seem to be in conflict with his decision to purchase Pro-Provider. This is because it is typical in such instances that high-ranking personal will be party to non-compete agreements which are intended to prevent them from exploiting their role within the framework of an organization as a way of ultimately undermining said organization.

However, a Supreme Court of Missouri decision reveals that non-compete agreements are not a cut-and-dry statement of prohibition against providing competition for a former employer. As Corrigan & Kass (2006) report, "protection of the employer, not punishment of the employee, is the essence of the law."An employer cannot extract a restrictive covenant from an employee merely to protect himself from competition.' The Supreme Court of Missouri has stated that '[a]greements of this kind restrain commerce and limit the employee's freedom to pursue his or her trade.' Therefore, as restraints...

. . is carefully restricted.'" (Corrigan & Kass, 1)
This means that contrary to assumptions, the onus will be on the aggrieved shareholder to prove that Holmes had acted unfairly in creating competition for his former employer. All indications are that he had presented his organization with the opportunity to purchase the company of which he would ultimately become the sole proprietor. When they failed to seize this opportunity, he did so personally and without any evidence that he behaved in a manner that was unfair. In all likelihood, any actions taken against him would be unsuccessful, even in the event that his Pro-Provider company would become a direct competitor to After School.

Works Cited:

Corrigan, W.M. & Kass, M.B. (2006). Non-Compete Agreements and Unfair Competition - an Updated Overview. The Missouri Bar.

Miehe, S. (2010). When You Can't Pay Your Business Debts: Personal Liability and Bankruptcy Options. NOLO.