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Creating enforceable noncompete agreements

At Neaton and Puklich, we understand that Minneapolis business owners need to protect their companies’ interests. Including noncompete agreements in recruitment and hiring processes is one popular way of doing this. These types of contracts may protect businesses against the possibility of employees switching to competitor companies. In order to be enforceable, however, these agreements must be carefully drafted.

According to the American Bar Association, enforceable noncompete contracts must meet certain basic criteria. These requirements are as follows:

  • The state must recognize noncompete agreements
  • Employers must provide something valuable to employees in exchange for signing their noncompetes
  • The contracts must address a legitimate business interest of the employer
  • Restrictions on employees cannot be overbroad
  • Noncompetes cannot place undue burdens on employees’ abilities to work

Generally, the first two criteria are not problematic. Minnesota recognizes noncompete agreements, so that requirement is usually not an issue. The ABA explains that courts often accept employment to be valuable enough to satisfy the second requirement.

Legal issues about enforceability tend to arise from the last three criteria. Arguments over whether a particular noncompete meets requirements may be complex. Often, the result in such cases will depend on fact-specific details about the parties’ circumstances.

While there is room for argument on many issues related to noncompetes, time restrictions must be drafted particularly carefully. In most cases, noncompetes should only last for about six months to one year. Anything longer than two years will usually be considered unreasonable.  

Visit our page on employment agreements to learn more about creating a binding noncompete agreement.  

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