Montana Supreme Court Holds That Employer May Not Enforce Non-Compete Agreement Where Employee Was Terminated Without Cause

As a result of a recent ruling by the Montana Supreme Court in a case of first impression in that state, an employer there — as in several other states — ordinarily will not be permitted to enforce a non-compete provision in an employment agreement where the employer was solely responsible for ending the employment relationship. Significantly, the ruling might be different if the employee misappropriated trade secrets.

Wrigg, a CPA, started working for JCCS in Helena as a staff accountant in 1987 and was promoted to shareholder in 2003. She signed a series of two-year employment agreements each of which contained a provision which had the effect of imposing a monetary penalty if, during the 12 months after termination “for any reason,” she rendered certain professional services to a competitor of JCCS. In May 2009, JCCS informed Wrigg that the agreement which would be expiring June 30, 2009 would not be renewed. After she left JCCS, she was hired by another accounting firm but for significantly less compensation because, allegedly, of that firm’s concerns about the JCCS covenant. She filed a declaratory judgment suit against JCCS, seeking to invalidate the non-compete. JCCS counterclaimed based on the penalty clause and prevailed at trial, but the Montana Supreme Court reversed in all respects. Wrigg v. Junkermier, Clark, Campanella, Stevens, P.C., Case No. DA 11-0147, 2011 MT 290 (Nov. 22, 2011).

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