As a general matter, Minnesota non-compete law does not care what type of employee you are. If the agreement is supported by adequate consideration, protects a legitimate business interest, and is reasonable in geographical and temporal scope, it will be enforceable. That being said, experience has shown that certain categories of employees have proven to be especially vulnerable to restrictive covenant enforcement. Those types of employees are summarized below.
Generally speaking, non-compete restrictions are a tool which can be used to prevent employees with sensitive and important confidential information from joining a competitor and using that information against the original employer. Since company executives tend to have the most important information – often about every aspect of the company’s business, including its long-term strategic plan – broad restrictive covenants against company executives are likely to be enforceable.
In addition, courts generally have little sympathy for well-compensated company executives seeking to get out from under an otherwise reasonable restrictive covenant. Unlike lower level employees, executives have usually been well compensated for their agreement not to compete, and likely had an opportunity to negotiate for the terms of the restrictive covenant in the first place. That being the case, any kind of equitable argument raised by a company executive in that context is unlikely to succeed.
Salespeople often have the single most valuable piece of sensitive information a company possesses: personal relationships with customers. That being the case, restrictive covenants targeted specifically at preventing salespeople from using those customer relationships to compete are often enforced. Most often the restriction at issue is a non-solicitation restriction, which allows the former employee to work in the industry, but prevents them from soliciting their former customers for some period of time.
These sorts of restrictions are most often enforced against high-achieving salespeople in highly competitive industries. The most common example is salespeople in the pharmaceutical and medical device industries. The major companies in these areas in Minnesota regularly sue former employees (and sometimes each other) over their restrictive covenants.
The final group of employees often targeted by restrictive covenant enforcement efforts are those involved in inventing company products or conducting scientific research leading to potential inventions. Such individuals often have insider information concerning inventions that are either in the market or in the development pipeline which could be used against the employer in the absence of any restrictions. Broad restrictions on their ability to quickly join a competitor are often upheld by courts.
If you are one of these potentially vulnerable employees, or if you employ such people, you should be sure to consult with an attorney experienced in this area regarding any issues or questions you may have. Please feel free to contact me at 952-460-9245 or [email protected] if you would like to discuss any issues surrounding restrictive covenants. And stay tuned for further installments in this series, addressing other key legal issues surrounding restrictive covenants.