Non-compete agreements often impose significant limitations on an employee’s ability to find comparable employment in their career field. Our employment lawyers are experienced in assessing, negotiating and litigating non-compete agreements. We advocate for the rights of employees.
Employees are often presented with restrictive non-competition agreements when starting a new job, during employment, or after separation as part of a severance package. While prohibited in some states, and becoming generally illegal in Minnesota, courts in Minnesota generally enforce non-competes entered into before July 31, 2023 if the terms are reasonable, so it is important to understand the effect they have on an employee’s ability to earn a living. Employees asked to sign a non-compete should have an experienced employment attorney review their agreement before signing it.
Terms of Non-Compete Agreements
Non-compete agreements typically contain three material restrictions on an employee’s ability to work and earn a living after separation from their current employer:
- Length of time for which they cannot work in a competing position;
- Type of job or field encompassed by the restriction; and
- Geographic scope of the non-compete territory
To be valid, the employee must receive something in exchange, called consideration, for agreeing to these restrictions. If an employer requires an employee to sign a non-compete agreement after he or she has started employment, continued employment is not enough, and the employer must provide something more.
Enforceability of Non-Compete Agreements
Non-competes can prevent people from earning an income, and in Minnesota, courts can narrow or void non-compete agreements that unnecessarily prevent a person from pursuing a livelihood. In narrowing a non-compete, courts consider the reasonableness of the terms, including whether or not the restraint is necessary for the protection of the business or good will of the employer, and if so, whether the stipulation has imposed upon the employee any greater restraint than is reasonably necessary to protect the employer’s business. Factors courts consider include:
- The scope of the employer’s business;
- The nature of the employee’s work during employment;
- The time for which the restriction is imposed; and
- The territorial extent of the locality to which the prohibition extends
If a court determines the restrictions are too broad, it could, for example, narrow a nation-wide non-compete restriction to a metro area, or reduce a restriction against working at a medical device company to limiting the employee’s work to exclude a particular type of medical device. Perhaps most common, a two-year period could be cut down to a shorter time period.
In some fields, especially for executives and sales employees, non-competition agreements can prohibit employment for a significant period of time. In these situations, it is critically important that the employee is compensated for the interruption to their career at the time of negotiating the agreement.
Contact Our Minnesota Employment Lawyers
The experienced employment lawyers of Wanta Thome assist employees in understanding, negotiating, and challenging their non-compete agreements. It is important to consult with an attorney if you have been offered a non-compete, if your employment options are restricted by a non-compete agreement, or if you are being sued by a former employer for an alleged breach of the non-compete. Contact us for a free case evaluation.
Contact us for a no-obligation confidential consultation with our employment law team.