As Amended by House Committee
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 that is not presumed to be
21enforceable pursuant to subsection (c) is determined to be overbroad or
22otherwise not reasonably necessary to protect a business interest of the
23business entity seeking enforcement of the covenant, the court shall modify
24the covenant, enforce the covenant as modified and grant only the relief
25reasonably necessary to protect such interests.
26(c) (1) An arrangement, contract, agreement, trust, understanding or
27combination shall not be deemed a trust pursuant to the Kansas restraint of
28trade act and shall not be deemed unlawful, void, prohibited or wrongful
29under any provision of the Kansas restraint of trade act if that arrangement,
30contract, agreement, trust, understanding or combination is a reasonable
31restraint of trade or commerce. An arrangement, contract, agreement, trust,
32understanding or combination is a reasonable restraint of trade or
33commerce if such restraint is reasonable in view of all of the facts and
34circumstances of the particular case and does not contravene public
35welfare.
36(2) A covenant in writing in which an owner agrees to not solicit,
1recruit, induce, persuade, encourage, direct or otherwise interfere with,
2directly or indirectly, one or more employees or owners of a business
3entity for the purpose of interfering with the employment or ownership
4relationship of such employees or owners shall be conclusively
5presumed to be enforceable and not a restraint of trade if the covenant is
6between a business entity and an owner of the business entity and the
7covenant does not continue for more than four years following the end of
8the owner's business relationship with the business entity.
9(3) A covenant in writing in which an owner agrees to not solicit,
10induce, persuade, encourage, service, direct or otherwise interfere with,
11directly or indirectly, a business entity's customers, including any
12reduction, termination, acceptance or transfer of any customer's business,
13in whole or in part, for the purpose of providing any product or service
14that is competitive with those provided by the business entity shall be
15conclusively presumed to be enforceable and not a restraint of trade if the
16covenant is limited to material contact customers and the covenant does
17not continue for more than four years following the end of the owner's
18business relationship with the business entity.
19(4) A covenant in writing in which an employee of a business entity
20agrees to not solicit, recruit, induce, persuade, encourage, direct or
21otherwise interfere with, directly or indirectly, one or more employees or
22owners of a business entity for the purpose of interfering with the
23employment or ownership relationship of such employees or owners
24shall be conclusively presumed to be enforceable and not a restraint of
25trade if the covenant is between an employer and one or more employees
26and the covenant:
27(A) Seeks, on the part of the employer, to protect confidential or trade
28secret business information or customer or supplier relationships,
29goodwill or loyalty; or
30(B) does not continue for more than two years following the
31employee's employment.
32(5) A covenant in writing in which an employee agrees not to solicit,
33recruit, induce, persuade, encourage, direct or otherwise interfere with,
34directly or indirectly, a business entity's customers, including any
35reduction, termination, acceptance or transfer of any customer's business,
36in whole or in part, for the purpose of providing any product or service
37that is competitive with those provided by the employer shall be
38conclusively presumed to be enforceable and not a restraint of trade if the
39covenant is limited to material contact customers and the covenant is
40between an employer and an employee and does not continue for more
41than two years following the end of the employee's employment with the
42employer.
43(6) A provision in writing in which an owner agrees to provide prior
1notice of the owner's intent to terminate, sell or otherwise dispose of such
2owner's ownership interest in the business entity shall be conclusively
3presumed to be enforceable and not a restraint of trade.
4(7) Notwithstanding the presumption of enforceability provided
5in subsections (c)(2) through (c)(5), an employee or owner shall be
6permitted to assert any applicable defense available at law or in equity
7for the court's consideration in a dispute regarding a written
8covenant.
9(d) The Kansas restraint of trade act shall not be construed to
10prohibit:
11(1) Actions or proceedings concerning intrastate commerce;
12(2) actions or proceedings by indirect purchasers pursuant to K.S.A.
1350-161, and amendments thereto;
14(3) recovery of damages pursuant to K.S.A. 50-161, and amendments
15thereto;
16(4) any remedy or penalty provided in the Kansas restraint of trade
17act, including, but not limited to, recovery of civil penalties pursuant to
18K.S.A. 50-160, and amendments thereto; and
19(5) any action or proceeding brought by the attorney general pursuant
20to authority provided in the Kansas restraint of trade act, or any other
21power or duty of the attorney general provided in such act.
22(e) The Kansas restraint of trade act shall not be construed to apply
23to:
24(1) Any association that complies with the provisions and application
25of article 16 of chapter 17 of the Kansas Statutes Annotated, and
26amendments thereto, the cooperative marketing act;
27(2) any association, trust, agreement or arrangement that is governed
28by the provisions and application of 7 U.S.C. § 291 et seq., the Capper-
29Volstead act;
30(3) any corporation organized under the electric cooperative act,
31K.S.A. 17-4601 et seq., and amendments thereto, or which becomes
32subject to the electric cooperative act in any manner therein provided; or
33any limited liability company or corporation, or wholly owned subsidiary
34thereof, providing electric service at wholesale in the state of Kansas that
35is owned by four or more electric cooperatives that provide retail service
36in the state of Kansas; or any member-owned corporation formed prior to
372004;
38(4) any association that is governed by the provisions and application
39of article 22 of chapter 17 of the Kansas Statutes Annotated, and
40amendments thereto, the credit union act;
41(5) any association, trust, agreement or arrangement that is governed
42by the provisions and application of 7 U.S.C. § 181 et seq., the packers and
43stockyards act; and
1(6) any franchise agreements or covenants not to compete.
2(f) If any provision of this section or the application thereof to any
3person or circumstance is held invalid, the invalidity does not affect other
4provisions or applications of this section which can be given effect without
5the invalid provision or application, and to this end the provisions of this
6section are severable.
7(g) As used in this section:
8(1) "Employee" means a current or former employee that agreed
9to a covenant in writing described in subsection (c)(4) or (c)(5).
10(2) "Material contact customer" means any customer or prospective
11customer that is solicited, produced or serviced, directly or indirectly, by
12the employee or owner at issue or any customer or prospective customer
13about whom the employee or owner, directly or indirectly, had confidential
14business or proprietary information or trade secrets in the course of the
15employee's or owner's relationship with the customer.
16(2)(3) "Owner" means a current or former owner or seller of all or
17any part of the assets of a business entity or any interest in a business
18entity, including, but not limited to, a partnership interest, a membership
19interest in a limited liability company or a series limited liability company
20or any other equity interest or ownership interest.
21(h) This section shall be a part of and supplemental to the Kansas
22restraint of trade act.
23Sec. 2. K.S.A. 2024 Supp. 50-163 is hereby repealed.
24Sec. 3. This act shall take effect and be in force from and after its
25publication in the statute book.