Putting employer non-compete agreements in their place

Much like the hastily drafted and adopted tax “reform” law championed by the Trump Administration, non-compete agreements generally reflect and worsen the disparity of leverage and resources between employers and employees.  Simply put, employers could run roughshod over employees’ right to provide for themselves and their families in a sustainable way if employer use of non-compete agreements were not kept in check.  To be clear, non-compete agreements seek to prevent employees from doing certain jobs or working in certain fields for a year or more after they stop working for their current employer.

Fortunately, the trend in Minnesota employment law of limiting the use of non-compete agreements by employers has continued.  Most recently, in St. Jude Medical, Inc. v. Carter, 913 N.W.2d 678 (Minn. 2018), the Minnesota Supreme Court rejected an employer’s effort to prevent a former employee from working for a competitor based on a non-compete agreement because the employer did not actually prove the employer will suffer irreparable harm such that an injunction could be proper.  The Minnesota Court of Appeals also recently ruled that an employer could not enforce a non-compete agreement because the employee did not receive separate value for signing the agreement – despite “the significant growth in compensation and dramatic expansion of duties [for the employee]. . . .”  In that case, Autoplink Technologies, Inc. v. Janson, 2017 WL 5985458, *5 (Minn. Ct. App. 2017), the Court reasoned that the better pay, profile, and benefits for the employee during employment were to be expected and, thus, not enough to make the non-compete agreement enforceable for an existing employee.

The decision in Autoplink follows a long line of cases, including the Minnesota Supreme Court decision in Kallok v. Medtronic, Inc., 573 N.W.2d 356, 361 (Minn. 1998), which make clear that “employment noncompete agreements ‘are looked upon with disfavor, cautiously considered, and carefully scrutinized.’”  Consequently, skills learned by an employee as a result of employment typically do not support a valid non-compete agreement.  Similarly, in Webb Pub. Co. v. Fosshage, 426 N.W.2d 445, 450 (Minn. Ct. App. 1998), the Minnesota Court of Appeals refused to enforce a non-compete agreement that did not significantly advance the employer’s actual business interests “because restrictive covenants are agreements in restraint of trade. . . .”  Minnesota courts also continue to reject non-compete agreements when the agreements are unreasonable in how long they restrict the work of employees or in how large of a geographic area the employers seek to impose the restrictions.

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