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How do courts approach enforcement of noncompete agreements?

by on
in Employment Law,Human Resources

Q. My company requires new employees to sign a two-year noncompete agreement. Are such agreements enforceable?

A.
Maybe. Laws regarding noncompetition agreements differ from state to state, so the answer to your question may be different depending upon where the employees are located, and which state’s law applies.

In Minnesota, courts will enforce noncompete agreements when necessary to protect legitimate business interests—such as preventing disclosure of trade secrets or protecting a company’s customer relationships. Courts will try to balance those business interests with an employee’s right to earn a living in his or her field, and the public’s interest in business competition.

In balancing those interests, courts assess the reasonableness of both the time restriction and geographic scope of the noncompete. With regard to time restrictions, courts may consider the amount of time needed to obliterate the connection between the employer and the former employee in the minds of the customers. They may consider the length of time needed for the employee’s replacement to learn the business and begin establishing relationships with the customers.

Although two-year agreements have been upheld in the past, one-year restrictions are far more common in Minnesota. For a court to be inclined to enforce a noncompete for a longer period of time, one would expect there to be either a very narrow geographic limitation or unique circumstance involving the customer relationships and other business interests.

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