In contract law, a non-compete agreement is a contract signed by one party to not enter into professional competition with another party. They are most often used by employers to prevent employees from opening their own business that is in direct competition to the employer. Some employers may require a non-compete agreement, sometimes called a covenant not to compete or a restrictive covenant, upon hire. Depending on the industry, these agreements can be quite common, but that does not mean they are always legally enforceable.
Can I break my non-compete agreement? This is a question that many employment attorneys are asked frequently as people try to find a way out of their agreement. It’s important to note that non-compete agreements are governed by state law and not federal law. This means that you need an employment lawyer who is an expert in your state’s laws to help determine if your non-compete clause can be enforced against you. In California almost no non-compete agreements, regardless of circumstances, are enforceable. Other states allow and enforce non-compete agreements but depending on the state the law may favor the employee and other states the law may favor the employer. If your non-compete clause states that it is governed by a specific state’s law, then your attorney needs to know the non-compete laws in that state.
Breaking a Non-Compete Agreement in Minnesota
In Minnesota, employment non-compete agreements are looked upon with disfavor and are cautiously considered and carefully scrutinized. However, non-compete agreements are enforceable in Minnesota if they serve a legitimate employer interest and are not broader than necessary to protect this interest. In determining whether to enforce a non-compete agreement or provision, the court balances the employer’s interest in protection from unfair competition against the employee’s right to earn a livelihood. If the employer’s interest outweighs the employees, the non-compete clause is valid and enforceable. H3: Adequate Consideration or Compensation
Minnesota courts will review the facts of each case to determine if a non-compete is valid and enforceable. The first thing a court determines is whether the employer provided the employee with adequate consideration for the non-compete. Consideration means the employee received something in return for signing the non-compete. If the non-compete agreement is entered into at the beginning of the employment relationship, the promise of employment will be considered adequate consideration to make the agreement valid. If the agreement is entered into after the employment relationship begins, it is not valid unless the employer provided some additional consideration, which would be additional money or another benefit to which the employee was not otherwise entitled. H3: Protecting a Legitimate Business Interest
Second, the Minnesota courts will review whether the non-compete protects a legitimate business interest. A non-compete clause will be held valid if it is necessary for the protection of the business or goodwill of the employer and is not broader than necessary to protect this interest. The types of legitimate business interests that the courts have said are permissible to protect by a non-compete include protecting an employer against an employee capitalizing on the relationship established with the employer’s customers. Other legitimate business interests that have been protected by a non-compete include preventing the disclosure of confidential information or the potential disclosure or disclosure of trade secrets. An employer must prove that an employee is benefitting from the relationship with the employer’s customers or disclosing trade secrets in order to make the case that they have a legitimate business interest to protect.
Another legitimate business interest is an employer’s specialized investment in an employee. Employers may protect any specialized investment or training that they provide to their employees with non-compete agreements. The employer must show that it provided the employee with extensive and specialized training. In all cases the court must find that the employer will be irreparably harmed if the business interest is not protected before the non-compete will be held valid and injunctive relief granted.
Reasonable Restrictions
The third issue the courts review to decide whether a non-compete is enforceable is whether the non-compete is not more restrictive than reasonably necessary to protect the employer’s business given the nature of that business, and the extent of the duration and the geographic scope of the restraint. If the non-compete is not for a reasonable duration and a reasonable geographical area, the non-compete may be held to be overly broad and not valid and unenforceable.
Almost all non-compete cases are decided in the context of a motion for either a temporary restraining order (TRO) or a temporary injunction. The courts will decide if the employee should be prevented from engaging in competitive activities and may award damages including, in certain cases, legal expenses. If an employer brings a lawsuit against an employee to enforce the non-compete, it can be expensive if it would go all the way to a trial, but most lawsuits are settled and a negotiated settlement is worked out between the parties.
If you have signed a non-compete and are concerned that you may be in violation of the agreement if you take a new position, you should speak to an attorney. If you are being asked to sign a non-compete, you should speak to an attorney to help you understand what you are agreeing to by signing the contract. If you have signed a non-compete, you should have a copy of the agreement so that you know what limitations it places on you. This will be important if you ever decide to leave your current employer. Ask for a copy of it before you are put in a position that you need the agreement. Review the agreement with an employment attorney. There are several factors that could make a difference in your case:
- You may not be in violation of the terms of your non-compete if you take a certain job or don’t do certain things. You will want to discuss your non-compete with an employment attorney to determine whether you should even be concerned about the non-compete be enforced against you.
- If your employer has done something illegal or against public policy and you have to leave your employment with them, you may have an argument that the non-compete shouldn’t be enforced against you. The employer may be willing to resolve all claims with you, thus releasing you from the non-compete.
- As stated above, an employer needs to have a legitimate business interest to protect, such as trade secrets or proprietary information, before a non-compete is going to be enforced. If there is no legitimate business interest to protect, the agreement can’t be enforced.
- If the non-compete agreement is overly broad and the terms of the agreement are not reasonable, it may not be enforceable.
- If you didn’t sign the agreement until after you accepted the offer of employment, and you were not given any further consideration for signing the agreement, it may not be enforceable.
- If you did sign a valid non-compete and the company has not enforced the agreement against other people, you may have an argument that the non-compete shouldn’t be enforced against you.
Employment law is complicated, and it is important to work with an experienced employment attorney. Contact John Holden at Holden Law Firm for answers to any questions you might have regarding your non-compete agreement or other employment law matters. As an expert in the field, John Holden provides knowledgeable, experienced legal counsel for employees in the Twin Cities. Call today to discuss the details of your case. This article may not be reproduced in any form without the permission of Holden Law Firm. © Copyright 2021 Holden Law Firm. All rights reserved.
