Session of 2025
SENATE BILL No. 241
By Committee on Judiciary
2-6
1AN ACT concerning restraint of trade; relating to restrictive covenants;
2providing that certain restrictive covenants are not considered a
3restraint of trade and shall be enforceable; amending K.S.A. 2024
4Supp. 50-163 and repealing the existing section.
5
6Be it enacted by the Legislature of the State of Kansas:
7Section 1. K.S.A. 2024 Supp. 50-163 is hereby amended to read as
8follows: 50-163. (a) The purpose of this section, and the amendments to
9K.S.A. 50-101, 50-112, 50-158 and 50-161 by this act chapter 102 of the
102013 Session Laws of Kansas, is to clarify and reduce any uncertainty or
11ambiguity as to the application of the Kansas restraint of trade act and
12applicable evidentiary standards to certain types of business contracts,
13agreements and arrangements that are not intended to unreasonably
14restrain trade or commerce and do not contravene public welfare.
15(b) Except as otherwise provided in subsections (d) and (e), the
16Kansas restraint of trade act shall be construed in harmony with ruling
17judicial interpretations of federal antitrust law by the United States
18supreme court. If such judicial interpretations are in conflict with or
19inconsistent with the express provisions of subsection (c), the provisions of
20subsection (c) shall control. If a covenant is determined to be overbroad or
21otherwise not reasonably necessary to protect a business interest of the
22business entity seeking enforcement of the covenant, the court shall modify
23the covenant, enforce the covenant as modified and grant only the relief
24reasonably necessary to protect such interests.
25(c) (1) An arrangement, contract, agreement, trust, understanding or
26combination shall not be deemed a trust pursuant to the Kansas restraint of
27trade act and shall not be deemed unlawful, void, prohibited or wrongful
28under any provision of the Kansas restraint of trade act if that arrangement,
29contract, agreement, trust, understanding or combination is a reasonable
30restraint of trade or commerce. An arrangement, contract, agreement, trust,
31understanding or combination is a reasonable restraint of trade or
32commerce if such restraint is reasonable in view of all of the facts and
33circumstances of the particular case and does not contravene public
34welfare.
35(2) A covenant in writing in which an owner agrees to not solicit,
36recruit, induce, persuade, encourage, direct or otherwise interfere with,
1directly or indirectly, one or more employees or owners of a business
2entity shall be conclusively presumed to be enforceable and not a restraint
3of trade if the covenant is between a business entity and an owner of the
4business entity and the covenant does not continue for more than four
5years following the end of the owner's business relationship with the
6business entity.
7(3) A covenant in writing in which an owner agrees to not solicit,
8induce, persuade, encourage, service, direct or otherwise interfere with,
9directly or indirectly, a business entity's customers, including any
10reduction, termination, acceptance or transfer of any customer's business,
11in whole or in part, for the purpose of providing any product or service
12that is competitive with those provided by the business entity shall be
13conclusively presumed to be enforceable and not a restraint of trade if the
14covenant is limited to material contact customers and the covenant does
15not continue for more than four years following the end of the owner's
16business relationship with the business entity.
17(4) A covenant in writing in which an employee agrees to not solicit,
18recruit, induce, persuade, encourage, direct or otherwise interfere with,
19directly or indirectly, one or more employees or owners of a business
20entity shall be conclusively presumed to be enforceable and not a restraint
21of trade if the covenant is between an employer and one or more
22employees and the covenant:
23(A) Seeks, on the part of the employer, to protect confidential or trade
24secret business information or customer or supplier relationships,
25goodwill or loyalty; or
26(B) does not continue for more than two years following the
27employee's employment.
28(5) A covenant in writing in which an employee agrees not to solicit,
29recruit, induce, persuade, encourage, direct or otherwise interfere with,
30directly or indirectly, a business entity's customers, including any
31reduction, termination, acceptance or transfer of any customer's business,
32in whole or in part, for the purpose of providing any product or service
33that is competitive with those provided by the employer shall be
34conclusively presumed to be enforceable and not a restraint of trade if the
35covenant is limited to material contact customers and the covenant is
36between an employer and an employee and does not continue for more
37than two years following the end of the employee's employment with the
38employer.
39(6) A provision in writing in which an owner agrees to provide prior
40notice of the owner's intent to terminate, sell or otherwise dispose of such
41owner's ownership interest in the business entity shall be conclusively
42presumed to be enforceable and not a restraint of trade.
43(d) The Kansas restraint of trade act shall not be construed to
1prohibit:
2(1) Actions or proceedings concerning intrastate commerce;
3(2) actions or proceedings by indirect purchasers pursuant to K.S.A.
450-161, and amendments thereto;
5(3) recovery of damages pursuant to K.S.A. 50-161, and amendments
6thereto;
7(4) any remedy or penalty provided in the Kansas restraint of trade
8act, including, but not limited to, recovery of civil penalties pursuant to
9K.S.A. 50-160, and amendments thereto; and
10(5) any action or proceeding brought by the attorney general pursuant
11to authority provided in the Kansas restraint of trade act, or any other
12power or duty of the attorney general provided in such act.
13(e) The Kansas restraint of trade act shall not be construed to apply
14to:
15(1) Any association that complies with the provisions and application
16of article 16 of chapter 17 of the Kansas Statutes Annotated, and
17amendments thereto, the cooperative marketing act;
18(2) any association, trust, agreement or arrangement that is governed
19by the provisions and application of 7 U.S.C. § 291 et seq., the Capper-
20Volstead act;
21(3) any corporation organized under the electric cooperative act,
22K.S.A. 17-4601 et seq., and amendments thereto, or which becomes
23subject to the electric cooperative act in any manner therein provided; or
24any limited liability company or corporation, or wholly owned subsidiary
25thereof, providing electric service at wholesale in the state of Kansas that
26is owned by four or more electric cooperatives that provide retail service
27in the state of Kansas; or any member-owned corporation formed prior to
282004;
29(4) any association that is governed by the provisions and application
30of article 22 of chapter 17 of the Kansas Statutes Annotated, and
31amendments thereto, the credit union act;
32(5) any association, trust, agreement or arrangement that is governed
33by the provisions and application of 7 U.S.C. § 181 et seq., the packers and
34stockyards act; and
35(6) any franchise agreements or covenants not to compete.
36(f) If any provision of this section or the application thereof to any
37person or circumstance is held invalid, the invalidity does not affect other
38provisions or applications of this section which can be given effect without
39the invalid provision or application, and to this end the provisions of this
40section are severable.
41(g) As used in this section:
42(1) "Material contact customer" means any customer or prospective
43customer that is solicited, produced or serviced, directly or indirectly, by
1the employee or owner at issue or any customer or prospective customer
2about whom the employee or owner, directly or indirectly, had confidential
3business or proprietary information or trade secrets in the course of the
4employee's or owner's relationship with the customer.
5(2) "Owner" means a current or former owner or seller of all or any
6part of the assets of a business entity or any interest in a business entity,
7including, but not limited to, a partnership interest, a membership interest
8in a limited liability company or a series limited liability company or any
9other equity interest or ownership interest.
10(h) This section shall be a part of and supplemental to the Kansas
11restraint of trade act.
12Sec. 2. K.S.A. 2024 Supp. 50-163 is hereby repealed.
13Sec. 3. This act shall take effect and be in force from and after its
14publication in the statute book.