A non-competition agreement is an agreement that employers use to limit their employee’s behavior after the employee leaves their company. As an employer, the thought of an employee taking all of your customers along with your confidential information and then starting up a competing business across the street is terrifying. To protect against this, employers can require and/or request that their employees sign non-competition agreements. These agreements can touch on requirements of confidentiality as well as a requirement not to work for a competing business within a defined geographical area for a period of time.
Before an employer drafts a non-competition agreement prohibiting an employee from ever globally working for a competitor, there are numerous things to consider. Non-competition agreements are generally disfavored with courts as a restriction on trade. In order to create an enforceable non-competition agreement, an employer needs to ensure that the agreement is narrowly tailored to protect specific business needs. The employer needs to ensure that the agreement is reasonable in duration, how long the employee is prohibited from certain actions, the scope, what conduct is prohibited, as well as the geographical range.
However, even if the agreement is reasonable, the agreement may be invalid because it was not appropriately entered into. For every contract, such as a non-competition agreement, each party needs to offer something of value - this is called “consideration.” The question becomes: what does an employer need to offer as consideration in order to make the non-competition agreement enforceable.
In both Minnesota and Wisconsin, if the agreement is negotiated prior to hiring, this is enough consideration. Trickier is the analysis of what constitutes adequate consideration once the individual is employed. In Wisconsin, continued employment is enough. This means that an employer can say to an at-will employee “if you do not sign this you will no longer be employed.” Their continued employment is sufficient consideration to make the agreement enforceable. In Minnesota, even if the employer is ready to terminate for failure to sign, this is not sufficient consideration. The employer needs to offer something else of value such as a bonus, a raise, or a promotion.
Crafting an enforceable non-competition agreement, especially with a business that operates in both Minnesota and Wisconsin, can be an impossible task to the inexperienced. Any businesses looking to protect confidential information and maintain customers should seek assistance of an experienced attorney.
questions about this topic?
If you have any questions about the content of this article or are looking for assistance in drafting a non-competition agreement, please contact Labor & Employment attorney Lida Bannink at 651-351-2116, or email at firstname.lastname@example.org.