Noncompete violation means no unemployment

In highly competitive industries, employees with access to trade secrets and customer lists are often asked to sign noncompete agreements. The agreements typically bar sales of competing products and setting up competing businesses.

When an employee is fired for violating the terms of a noncompete, he won’t receive unemployment compensation because he committed willful act of wrongdoing, which bars benefits. It doesn’t matter if the employee’s supervisor was involved in the breach.

Recent case: When Lukas took a job as a medical equipment and device salesperson, he signed a noncompete agreement that forbade having a competing business on the side or selling a competitor’s products to company clients. Lukas was successful, earning more than $800,000 per year.

The trouble began when a doctor told Lukas that the company’s wound-healing equipment wasn’t working for a particular patient. Lukas went to his boss for advice.

That supervisor ran a competing business on the side, which sold what he believed was a better wound-healing system. He suggested Lukas sell it to the doctor. Lukas did and accepted a commission from his supervisor’s business. When their employer found out, Lukas was terminated.

He applied for unemployment benefits, which he initially received; the unemployment law judge said his noncompete violation was minimal and noted that his supervisor had encouraged the sale.

The company appealed. Now the Court of Appeals of Minnesota has reversed the benefit award and concluded that Lukas engaged in wrongdoing and violated his duty of loyalty.

The court suggested that if employees are unsure what to do when a supervisor suggests a possibly illegal or disloyal course of action, they should should consult higher ups before following the boss’s advice. (Tornquist v. Mimedx Group, Court of Appeals of Minnesota, 2018)