A non-compete agreement is a contract that employers in competitive industries regularly have their employees sign. The document forbids new employees from using any information they learn while employed against their former employers should they decide to leave in the future. The same document also prevents them from taking employment with a rival — this is especially significant when it comes to legal professionals and similar trades. In any case, the non-compete really is made to protect the employer.
Non-Compete in Minnesota Law
Non-compete agreements are a special type of contract and are not treated the same way in all states. Other courts may not be in favor of the agreement, but under Minnesota law, it is enforceable but only under certain circumstances.
Minnesota’s courts will only recognize the agreement if it is supported by “consideration”, protects the interests of the employer, and has a reasonable scope, duration, and geographic area. Ask your local business lawyer in St. Paul and you can expect to learn about the following terms:
A consideration means the employee is receiving something in return, e.g. compensation, salary and bonus, and without it the agreement is invalidated.
The agreement must protect the interest of the employer or the business. That is, violating the agreement will cause damage to the business. If the agreement only aims to punish the former employee, it will be taken against the company.
The substantive scope of the agreement varies. Some non-compete agreements only forbid the employee from working for a competitor, while some limits a person’s activities. As long as the employee does not steal clients, he may still work in the same industry.
A reasonable duration pertains to the length of time the employer finds a replacement that will take over the clients left by the former employee. Under Minnesota law, a year is sufficient for the hiring, training and introduction. Two years may still be reasonable, but other courts struck this down. Three is considered non-reasonable.
Lastly, a reasonable geographic limit encompasses the scope where the employer does business. A nationwide scope is only reasonable if the company offers products and services nationwide.
The agreement can be struck down in court if it disregards the above terms, or honored if it is substantial. In some cases, it can be re-written or “blue penciled” to be reasonable. Either way, employers with issues regarding non-compete laws can solicit advice from experienced business lawyers to address the issue.