Noncompete contracts are being used with increasing frequency by businesses in Minnesota and elsewhere. This is particularly true for businesses involving technology, scientific formulas, recipes, or other trade secrets, or businesses in which there are particularly close relationships between sales people or other customers.
Minnesota courts will uphold noncompete contracts if they are reasonable. In order to be valid, noncompete contracts must be entered into at the beginning of the employment relationship. If the noncompete agreement is entered into after the employment relationship begins, it is not valid unless the employer furnished what is known as "independent consideration" to the employee. This usually consists of some additional compensation or other benefits to which the employee was not otherwise entitled.
Restrictions contained in noncompete agreements must be limited in scope and duration. Generally, noncompete agreements that are two years or less in length and are not overly broad in terms of geography will be upheld. Similarly, noncompete agreements must be restricted to actual competition and may not be so broad as to prevent an employee earning a living.
In Minnesota, the judge may modify a noncompete agreement to make it more reasonable. This rule is called the Blue Pencil Doctrine. However, it is not followed in some other states, such as Wisconsin, where noncompete agreements are more disfavored by the law. Some states, such as California, refuse to allow them at all.
Noncompete agreements can be enforced by injunctions which prohibit individuals from engaging in proper competitive activities. Courts also may award damages and, in some cases, legal expenses to parties that prevail in noncompete cases.
For more information about noncompete agreements and related subjects, please contact us through our e-mail or by calling (612) 339-4295.