Most employers in Minnesota ask their employees to sign non-compete agreements. Whether a specific non-compete agreement is enforceable against the employee depends heavily on the exact circumstances surrounding the signing and execution of the agreement.
Formalities of execution
Most courts in Minnesota have ruled that a non-compete agreement that is signed after the term of employment begins is unenforceable because it lacks consideration. To put it a bit differently, the offer of employment is deemed to be sufficient consideration. If the employee signs the agreement after the beginning of the term of employment, the contract lacks consideration and cannot be enforced. Some courts have found other forms of consideration to support enforcement, but the best practice is to have the employee sign the agreement before beginning employment.
Reasonableness
Even if a non-compete agreement is supported by adequate consideration, its terms must be reasonable given the nature of the employee’s work. The contract must protect a “legitimate business interest” of the employer. In other words, the scope of the agreement cannot exceed the employer’s reasonable needs. This requirement has been found to limit both the geographic and chronological scope of the agreement. For example, a non-compete that applies to the entire United States would not be enforceable by an employer whose business comprises mostly states geographically adjacent to Minnesota.
Similarly, an agreement that purports to last for the lifetime of the employee may be deemed unreasonable unless the employer can prove a need for protection that will extend to the end of the employee’s life. Reasonableness in this context is usually measured by the amount of time required for the employer’s customers to identify a replacement employee as representing the employer or the time required for a replacement employee to learn the rudiments of the position.
Anyone who has signed a non-compete and is wondering if it can be enforced by the former employer may wish to consult an experienced employment law attorney for a review of the contract and an opinion on its enforceability.