Non-Compete and Non-Solicitation Agreements

Non-Compete and Non-Solicitation Agreements

Intellectual capital is a driving factor of competition within any market. It is a significant investment for businesses that hire employees to create the ideas and products which will give them the competitive edge. For an employer, non-compete and non-solicitation agreements are popular tools used to protect investments made in that intellectual capital.

These agreements are fairly self-defining. A typical non-compete agreement states that an employee may not – while working for an employer or for some specific period of time afterwards – form a competing business or work for a competitor. A typical non-solicitation agreement states that an employee may not for a specific period of time solicit their employer’s customers when they do form a competing business or work for a competitor.

Non-compete and non-solicitation agreements are often challenged in court, so they must be well drafted and implemented in order to be judicially enforced. Under Minnesota law, for these agreements to be enforceable, they should satisfy these three requirements: they must protect a legitimate interest of the employer, they must be limited to a scope and period which are deemed reasonable (typically two to three years maximum), and they must be supported by adequate consideration (some consideration given to the employee in return for their signature of the agreement, which could at the time of hiring be the job itself or later be a fee paid to the employee).

An employer should take care to ensure that an individual is not subject to an active non-compete agreement before hiring them, as the company may be liable if the individual is in breach of an agreement. These agreements additionally should not be confused with the processes of directly protecting copyrights, trademarks, patents, and trade secrets. Non-compete and non-solicitation agreements protect these forms of intellectual property in some cases, but not all cases.