Q. We recently merged with a smaller company, taking on several new sales people. Most of our existing sales staff are long-time, loyal employees, so we haven’t previously used noncompete agreements. However, we’re now reconsidering this. Can we require all of our sales staff to sign noncompetes?
A. Yes. There are, however, important hoops you need to jump through to ensure that any noncompete agreements are enforceable. In Minnesota, noncompete agreements can contain reasonable restrictions.
The timing of the signing of the agreement is often a crucial point. If a noncompete agreement is signed as part of an offer of new employment, it will be enforceable to the extent that a judge deems the restrictions reasonable. Having existing employees—even those employed for as little as one day—sign noncompetes is more complicated.
An employee must receive something beyond the mere continuation of employment in exchange for signing a noncompete agreement. That might consist of a signing bonus, a new bonus or incentive-based compensation plan, stock option rights or similar benefits.
In your situation, it appears likely that both new and existing employees would need additional consideration in exchange for signing a noncompete agreement if the new employees have already started work with your company.
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