Non-Compete Agreements

Usually Enforced in Minnesota

1. Non-Compete Agreements are Enforced in Minnesota
   
   
2. See a Lawyer Before Signing a Non-Compete Agreement
   
   
3. A Non-Compete Agreement submitted to and Signed by an Employee after Employment Begins, is enforceable.
   
   
4. When seeking Employment, a Prospective Employee should ask if a Non-Compete Agreement will be Required.
   
   
5. There are Two Primary Ways a Non-Competition Agreement will be Enforced Against a Former Employee.
   
   
6. An Employer may be liable in damages for hiring someone who has signed a non-Compete Agreement with a former employer.
   
   
7. A Non-competition Agreement can even be Enforced Against a Former Employee who has been Fired by a Former Employer.
   
   
8. Even if Employees have not Signed Non-competition Agreements, They Still have Certain Duties, by Law, towards Former Employers.
   
   

1. Non-Competition Agreements Are Enforced In Minnesota
   
   

   In Minnesota, an agreement by an employee restricting him or her from competing with a former employer is generally enforceable, for a period of between one and two years after employment terminates. These "Non-Compete Agreements," sometimes called "no compete covenants" or "restrictive covenants," are considered important, and even essential in Minnesota, to protect an organization's legitimate economic interests including trade secrets, confidential business strategies and long-term relationships with customers that would otherwise be taken by a former employee for the benefit of a new employer.

   Executives, professionals and highly paid salespersons who leave a business and compete could destroy a former employer. The need for enforcement of non-competition covenants against them is obvious. However, employers often require even lower level employees, particularly sales personnel, to also sign non-compete agreements. Even though these employees will not likely cause long-term damage to a former employer, non-competition agreements are often enforced against them in Minnesota. Because of their likely enforceability, there are several matters which must be considered by any employee, not only before signing such a document but later, if the employer changes the employee's compensation or the employee quits or is fired. They are considered in the immediately following discussions.

2. Like Any Very Important Document, A Non-Compete Agreement Should Be Reviewed With A Lawyer Before Signing It.
   
   

   A Non-compete Agreement is one of the most important legal documents a working person will ever be asked to sign. Since a non-competition agreement prevents workers who sign it from competing with a present employer after that employment terminates, it most likely means a change of careers, at least for one and possibly even two years. For some, but not all such employees, competition may be permitted by moving to another city or state or by not soliciting business from customers with whom the restricted employee had a relationship. Since very few of us have the financial resources to not work, there will be hard choices for many employees who sign a non-competition agreement and their employment terminates. Advice from a lawyer familiar with Non-compete Agreements before signing such a document is strongly recommended.

   Your lawyer may be able to negotiate some changes in the proposed Agreement that make a less drastic impact on your ability to earn a living, particularly if you're terminated unexpectedly. The person or organization asking anyone to sign a Non-Competition Agreement probably retained a lawyer to prepare it. The person asked to sign such an Agreement should do likewise.

3. A Non-Compete Agreement Submitted To An Employee And Signed During Employment, Rather Than At Or Before Employment Begins, Is Also Enforceable.
   
   

   Often, an Employer will submit a Non-compete Agreement to an Employee even months or years after employment begins. If the Employee receives "real benefit" from the Employer for signing such a "Late" Non-competition Agreement, it is valid and enforceable. Although "real benefit" must generally be something other than merely continuing employment at the same salary, payment of as little as $1,000 has been deemed sufficient. In other words, for less than two month's rent or home mortgage payments, the employee has signed a Non-Competition Agreement, after starting employment, which is just as enforceable as one signed before or at the beginning of employment. Any employee asked to sign such a document, particularly if it's shortly after beginning employment, should seek competent legal advice before signing it.

4. When Seeking Employment, A Prospective Employee Should Ask If A Non-Competition Agreement Will Be Required?
   
   

   And, if the answer is "no," before accepting employment, the prospective employee should also ask for written assurances that no such Agreement will ever be required.

5. A Non-Compete Agreement Violated By A Former Employee Is Usually Enforced By Court Ordered Injunction. Often, The Former Employee Has To Pay The Former Employer's Attorneys Fees.
   
   

   Generally, if a former employer decides to enforce a Non-Competition Agreement against a competing former Employee, it will seek an injunction. An injunction is an Order of a Court which can be obtained by the Employer almost immediately upon learning the former employee is working in violation of the terms of a non-competition agreement. Any injunction must be obeyed because it is a Court Order. If a former employee violates an Injunction, he can be found in Contempt of Court and punished. Many Non-Competition Agreements also provide that the former employer can recover from the former employee all costs and attorney fees incurred in enforcing that agreement. With such a clause in the Non-competition Agreement, the Court must award reasonable attorney fees to the former Employer. Those costs and fees, themselves, are, by themselves, a substantial burden on the former employee. Occasionally, the former employer may choose to sue the former employee for damages and not pursue an injunction. A substantial award in damages, including recovery of costs and attorneys fees if the Agreement includes such a provision, could also have a disastrous result on the former Employee.

6. Any Minnesota Employer Hiring Someone Subject To A Non-Compete Agreement May Be Liable For Substantial Damages
   
   

   In Minnesota, an employer who hires and knowingly allows an employee to compete in violation of a Non-competition Agreement may be liable in damages to that employee's former employer. Because such damages would likely be substantial, most businesses are extremely reluctant to hire any employee that is a party to a Non-competition Agreement. Under many circumstances, even businesses in another state will not hire someone subject to a Minnesota Non-competition Agreement because of concern of liability in damages to the former employer in Minnesota. Obviously, an employee asked to sign a non-competition agreement should be aware that if he or she is terminated or leaves that employment for any reason, options of finding employment in the same field with another employer, even in another state, may not exist.

7. Non-Compete Agreements Are Even Enforceable Against Former Employees That Are Fired.
   
   

   In Minnesota, an employer is often able to obtain an injunction against a former employee it has fired and with whom it has a Non-Competition Agreement. The reason for termination can be simply the employee's inability to meet sales goals or quotas, although exactly why a former employer would want to prohibit such a person from competing is hard to understand. Enforcement of Non-competition Agreements are not always limited to employees who voluntarily quit in Minnesota. The possible right of an employer to enforce a Non-competition Agreement against a former employee under these circumstances is probably the most persuasive reason for any employee to seek legal counsel before signing such an Agreement to "negotiate out" such a drastic result.

   Any employee asked to sign a Non-competition Agreement in Minnesota should also realize that the person presenting the Agreement to him, who is likely a wise, fair and friendly supervisor, may retire, be promoted or transferred and another boss will replace him. That new boss may not the same as the old boss. There may be dislike and conflicts. However, the Non-competition Agreement the employee previously executed would still be enforceable and may prevent the Employee from finding employment elsewhere, at least in the same career. These uncertainties and dynamics of the workplace should also be considered when a Non-competition Agreement is submitted to any employee for signature.

8. Even If Employees Have Not Signed Non-Competition Agreements, They Still Have Certain Duties, By Law, Towards Former Employers Restricting Their Activities.
   
   

   The former employer is owed a duty of loyalty by the former employee with or without a Non-competition Agreement. Included in that duty is an obligation not to misappropriate and use, at any time, confidential information or trade secrets belonging to any former employer. The penalties for using such information or trade secrets include damages and injunction, either of which could be substantial and economically disastrous.

   Another aspect of that Duty of Loyalty is the prohibition against any employee soliciting customers of the employer until after that employment relationship is terminated, whether or not the employee has signed a non-competition agreement. Any such "pre-termination customer solicitation" could result in either or both damages or Court ordered injunction in the employee's new business endeavor. Occasionally, this ban against pre-termination solicitation of customers also applies to pre-termination solicitation of fellow employees and even vendors of the former employer.

   Courts also occasionally recognize a duty of a former employee, even after his employment terminates, not to hire such a substantial number of personnel of a former employer that it cannot continue functioning as a business operation.

   Although an employee can engage in "pre-termination planning" to organize a new business venture, the above described duty of loyalty limits such planning activities. Before engaging in any of them, competent legal counsel should be consulted to be certain that the intended conduct is permitted and that all communications with anyone is permitted and any information which will be or has been removed from a former employer's premises or control is not confidential information or trade secrets.

Please visit Practice Areas and review the areas important to you.

Next, go to About Lee Watson for an overview of my practice.

Above all, be sure to visit Contact Us. All online inquiries are answered within 48 hours or call us at (612) 333-2331 or (800)211-3379.