By far, the most frequently asked question of lawyers practicing in the areas of employment and trade secret law goes something like this: “I signed this non-compete agreement when I started working at my company because everyone I talked to told me that these things aren’t really enforceable. I’m getting ready to leave and somebody told me I should check on this before accepting an offer from a competitor. The non-compete not really enforceable, is it?”
Actually, in all likelihood, not only is it enforceable, the chances are pretty good that your soon to be former employer will take action to enforce it. And, if that happens, chances are equally good that to avoid being brought into the dispute, your new employer will rescind its offer or, if you have already started working, terminate your employment unless you work out a compromise with the former employer.
The fact is that with the exception of California, North Dakota and Oklahoma, almost every other state will quite readily enforce an employee non-compete agreement that is meets the requirements of proper contract formation and is limited to what is reasonably necessary to protect an employer’s legitimate business interests. (On May 8, 2019, the state of Washington enacted legislation limiting the enforceability of employee compete agreements to employees earning more than $100,000 a year, independent contractors earning more than $250,000 a year from a business, and requiring that the non-compete period run no longer than 18 months following termination.)
A well-drafted, thoughtful non-compete agreement that is reasonable in its geographic and temporal scope and that goes no further than necessary under the circumstances of the employer’s industry and the employee’s position in the company, will almost always be upheld. As long as an employer can demonstrate that the terms of the agreement are “reasonable” in time and geographic scope, and reasonably related to the employer’s legitimate business interests, courts will routinely uphold the agreement.
What is a “legitimate business interest” that is worthy of a non-compete restriction? In Minnesota, all an employer needs to do to demonstrate a “legitimate business interest” is provide credible evidence that non-compete restriction is intended to protect the employer’s trade secrets, confidential information and goodwill. Trade secrets are defined by statute and confidential information is a broad term covering any other information that provides real or potential economic value to the employer by virtue of its confidential nature.
Even if the Company does not have trade secrets or confidential information worthy of protection, the Company still has a legitimate business interest in its goodwill, such as the company’s brand, reputation, good name, track record and relationships with customers, suppliers, vendors and the public, and therefore it will have a legitimate interest in protecting itself against “the deflection of trade or customers by the employee by means of the opportunity which the employment has given him.” What an employer cannot do is enforce an agreement that is so overbroad as to prohibit ordinary competition in addition to unfair competition.
If a well-meaning colleague tries to tell you not to worry about your non-compete agreement because the company would never be able to enforce it, ignore them and call an attorney. That well-meaning colleague may be correct, your non-compete might not be enforceable, but only if you live and work in a jurisdiction that bans such agreements or the agreement is otherwise defective or improperly formed.