How do Minnesota courts view non-compete agreements?

Running a successful business often means performing a variety of duties at the same time. You may be a jack of all trades but a master of none when it comes to business management. That is a very common approach, but it can be dangerous when it comes to your employment contracts.

Specifically, parts of the employment contract that are vulnerable to later challenges by your employees should be reviewed by or created by someone with more experience in this field. Non-compete agreements are a perfect example.

Businesses typically include a non-compete agreement in an employment contract to protect themselves from an employee who poaches clients or steals intellectual property from a company in the hope of profiting. Having every employee agree not to compete in the same industry for a set number of years or within a certain number of miles can protect a business. However, these additions to your contract do very little good if they are not valid.

You should present your non-compete before making an offer of employment

Every state has its own approach to business law and non-compete agreements. In Minnesota, the courts can and do uphold non-compete agreements, provided that they are legally sound and fair to the person signing. Typically, this means that the person signing the non-compete agreement should receive a valuable consideration for their willing signature.

For those who must sign a non-compete as a term of their employment, the offer of employment is typically the valuable consideration. However, in order for that to be fair and reasonable, you must disclose the terms of the non-compete agreement to the potential employee before making an offer of employment. If you do not, the employee could theoretically challenge the non-compete agreement in court and have it thrown out as invalid.

Existing employees must receive some benefit beyond remaining employed

It is not uncommon for a company’s practices to change over time. As your business grows and expands, you will need to take more legal steps to protect your business and its intellectual property. That may mean that you have staff members who have worked with you from the beginning that did not sign non-compete agreements, but now you need the protection of that non-compete agreement.

In order to legally require them to sign, you need to offer them some form of consideration, whether it is a one-time bonus or a promotion. If you simply request that all existing staff sign, many of them likely will. However, if one chooses to challenge the non-compete agreement in court, your company could lose.

Understanding Minnesota’s expectations and requirements for non-compete agreements can help ensure that your company maximizes its protections through the use of these very specific additions to your contracts.

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