Are noncompete agreements legal for employees?

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In Minnesota noncompete agreements are disfavored, but they are legal if they meet strict standards set by the courts.

Before talking about those standards, it is important to define what a noncompete agreement is. A noncompete agreement (sometimes known as a “covenant not to compete”) is an agreement by an employee to not compete against his or her employer. The purpose of a noncompete is to protect the employer who invests in an employee, only to have that employee leave and work for a competitor who then benefits from the employer’s investment.

One of these standards is that the noncompete must meet the test for being a contract. This means that the employee must receive something of value in exchange for his or her commitment to not compete against the employer. When the employee agrees to a noncompete at the start of employment, the job itself typically satisfies this test. However, if a noncompete is presented to someone who is already employed, the employer must provide a new benefit to support employee’s commitment. This could be a raise, bonus, promotion or something else of value.

Assuming that a noncompete meets the test for being a proper contract, it will only be enforceable if it serves a legitimate interest of the employer and is no broader than needed to protect that interest. This means that when considering whether or not to enforce a noncompete, the courts will balance the employer’s interest in protection from unfair competition against the employee’s right to earn a livelihood.

In addition, the courts will typically look closely at how restrictive the noncompete is. They will consider the duration and geographic scope of the restrictions. They will also consider whether or not the employer’s competitive business market is too broadly defined in the agreement. In cases where the courts find that a noncompete is generally valid, the courts also have the power to “blue pencil” the agreement to narrow its scope or shorten its duration to a point deemed reasonable under the circumstances.

When employers decide to enforce noncompetes, they typically seek an injunction, which is a court order requiring the employee to stop violating the agreement.  Even with a valid and enforceable noncompete, the right to an injunction is not assured. Among other things, the employer must present evidence of some actual or threatened irreparable injury that will result if the injunction is not granted.

Navigating through the complex world of noncompete agreements is a major challenge. If you have questions about your noncompete, please contact attorney Tom Jacobson at the Swenson Lervick Law Firm. As a certified labor and employment law specialist with nearly 30 years of experience, Tom is here to guide you through the process and to protect your rights.

Disclaimer: This article is not legal advice and must not be relied upon as such.

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