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Non-Compete Agreements

Non-Competes have become commonplace in the workplace and can be burdensome to employees and an effective way for employers to protect their business, employees, confidential information and trade secrets.  It is a myth that non-competes can’t be enforced against an employee and prevent the employee from working in a job that competes with their former employer.  If an employee signs a valid non-compete it could be enforced against the employee if the employee takes a position that competes with the employee’s previous employer.  If the employee doesn’t take a position that competes with the previous employer and doesn’t take any action that causes any damages or is not likely to cause damages to the previous employer it is unlikely that a non-compete would be enforced against the employee.  There are many ways that the non-compete could be flawed and it is important to discuss this with an employment attorney before signing the non-compete or when the employee is thinking about taking a new position that may compete with the previous employer.

In Minnesota, employment non-compete agreements are looked upon with disfavor and are cautiously considered and carefully scrutinized.  However, non-compete agreements are enforceable if they serve a legitimate employer interest and are not broader than necessary to protect this interest.

In determining whether to enforce a non-compete agreement or provision, the court balances the employer’s interest in protection from unfair competition against the employee’s right to earn a livelihood.  If the employer’s interest outweighs the employees, the non-compete agreement is valid and enforceable.

Minnesota courts will review the facts of each case to determine if a non-compete is valid and enforceable. The first thing a court determines is whether the employer provided the employee with adequate consideration for the non-compete.  Consideration means the employee received something in return for signing the non-compete.  If the non-compete agreement is entered into at the beginning of the employment relationship, the promise of employment will be considered adequate consideration to make the agreement valid.  If the non-compete agreement is entered into after the employment relationship begins, it is not valid unless the employer provided some additional consideration, which would be additional money or another benefit to which the employee was not otherwise entitled.

Second, the Minnesota courts will review whether the non-compete protects a legitimate business interest.  A non-compete clause will be held valid if it is necessary for the protection of the business or goodwill of the employer and is not broader than necessary to protect this interest.

The types of legitimate business interests that the courts have said are permissible to protect by a non-compete include protecting an employer against an employee capitalizing on the relationship established with the employer’s customers.  Other legitimate business interests that have been protected by a non-compete include preventing the disclosure of confidential information or the potential disclosure or disclosure of trade secrets.  Finally, employers may protect any specialized investment or training that they provide to their employees with non-compete agreements.  The employer must show that it provided the employee with extensive and specialized training. In all cases the court must find that the employer will be irreparably harmed if the business interest is not protected before the non-compete will be held valid and injunctive relief granted.

The third issue the courts review to decide whether a non-compete is enforceable is whether the non-compete is not more restrictive than reasonably necessary to protect the employer’s business given the nature of that business, and the extent of the duration and the geographic scope of the restraint.  If the non-compete is not for a reasonable duration and a reasonable geographical area, the non-compete may be held to be overly broad and not valid and unenforceable.

Almost all non-compete cases are decided in the context of a motion for either a temporary restraining order (TRO) or a temporary injunction.  The courts will decide if the employee should be prevented from engaging in competitive activities and may award damages including, in certain cases, legal expenses.  If an employer brings a lawsuit against an employee to enforce the non-compete, it can be expensive if it would go all the way to a trial, but most lawsuits are settled and a negotiated settlement is worked out between the parties.

You should contact an experienced employment attorney if you have questions regarding severance agreements. Contact Holden Law Firm and ask to speak to John Holden to discuss your employment law questions.

John C. Holden, Esq.
Holden Law Firm
5200 Willson Road, Suite 150
Edina, MN  55424
952-836-2640
John@holdenlawfirm.com
www.holdenlawfirm.com

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