More often than not, if anyone has signed a non-competition agreement, it is because it was included in their initial employment packet of documents to sign before the first day on the job. It is rare to negotiate the terms of a non-competition agreement, and even if the new employer is open to negotiation there exists an obvious unequal bargaining position. Accordingly, non-competition agreements are generally disfavored in Minnesota. However, that does not mean that following termination of employment that one may not be effectively enforced by the former employer.
Non-competition agreements have long been carefully scrutinized by Minnesota Courts and have been traditionally disfavored as restraints on an individual’s ability to make a living. As the Minnesota Supreme Court said almost one hundred years ago, “[o]ne who has nothing but his labor to sell, and is in urgent need of selling that, cannot well afford to raise any objection to any of the terms in the contract of employment offered him, so long as the wages are acceptable.” Menter Co. v. Brock, 147 Minn. 407, 411, 180 N.W. 553, 555 (1920). So, if enforcing a non-competition agreement is so difficult why bother?
In Minnesota, a Court may enforce a non-competition clause if it is necessary to protect reasonable interests of an employer, and does not impose unreasonable restraints on the rights of the employee. In determining whether the restraint is valid, Minnesota Courts analyze whether the restraint is for a just and honest purpose, for the protection of a legitimate interest of the party in whose favor it is imposed, reasonable as between the parties, and not injurious to the public.
Non-competition agreements are typically enforced through the filing of a motion for a temporary restraining order and temporary injunction. The former employer can usually request attorney’s fees pursuant to the agreement. Some of the most common reasons a non-competition agreement may fail is because it lacks consideration (nothing received by employee in exchange for agreeing to the restriction), the geographic scope may be too unreasonably expansive, or the restriction is for too many years.
Depending on the business, it may be worth it to enforce the non-competition agreement to protect the business from a former employee joining a competitor while revealing trade secrets, client lists, business and marketing plans, and myriad other forms of confidential information. Furthermore, even if the restriction is deemed to be too excessive, Minnesota allows the Court to modify the contract under what is called the “blue pencil doctrine” to enforce a particular provision in a reasonable manner. Under the blue pencil doctrine as it has developed in Minnesota, a Court can take an overly broad restriction and enforce it only to the extent that it is reasonable.
Litigation over non-competition agreements can be costly. Whether you are a former employee subject to a non-competition agreement trying to find a new job to make a living, the former employer trying to protect its business interests by possibly enforcing the non-competition agreement, or the new employer hiring the former employee, these issues should not be taken lightly.
*This article does not constitute legal advice and is not intended to constitute advertising or solicitation for legal services. Nothing in this article should be construed by you as a source of legal advice. You should not rely or act upon the contents of this article without seeking advice from your own attorney.