Protecting your Business: The Enforceability of Non-competition, Non-solicitation, and Confidentiality Provisions in Minnesota

By: Court Anderson , Benjamin (Ben) Hamborg , Eric Friske | May 16, 2018
Owning a Business

Two schools of thought tend to dominate the way employers and employees view the use of restrictive covenants—non-competition, non-solicitation, and confidentiality obligations—in employment agreements.

Some employers view restrictive covenants as just another contract provision, enforceable in court to the same extent as any other provision. Employers in this camp often make the mistake of inserting far broader restrictive covenants into their employment agreements than is necessary to protect their business interests, incorrectly believing that Minnesota courts will automatically enforce these broad restrictions.

At the other end of the spectrum are employers and employees who wrongly believe that restrictive covenants are never or rarely enforceable. These employers fail to include them when hiring new employees, while employees neglect to read and seek legal advice on them when joining a new employer. But the reality is that Minnesota courts will enforce restrictive covenants, provided they are reasonable and supported by adequate consideration.

To determine whether a restrictive covenant is reasonable, Minnesota courts weigh the employer’s interest in protection from unfair competition against the employee’s right to earn a living. To do so, they consider the nature and character of the business at issue, while analyzing these four factors:

  • Whether the restraint is necessary for the protection of the business or the goodwill (i.e., customer relationships) of the employer
  • Whether the restraint is broader than necessary to adequately protect the employer’s legitimate interests
  • The length of the restriction
  • The geographic scope of the restriction

Crafting enforceable restrictive covenants that fit your business needs

Although Minnesota courts recognize that restrictive covenants are often necessary to protect an employer’s business, they tend to view non-competition agreements as interfering with free competition in the marketplace. As such, a non-competition agreement that is found to be broader than necessary to protect the employer may not be enforced at all by the court, or may be enforced only to the extent the court believes reasonable.

Instead of non-competition provisions, employers may want to consider a customer-specific non-solicitation provision. Such restrictions, limited to preventing the solicitation of current and prospective clients, are generally seen as a reasonable means of protecting an employer’s business. Therefore, they are more likely to be enforced in most cases.

Based on the size and nature of the employer’s business, it may be a good idea to couple a customer non-solicitation provision with a prohibition against soliciting fellow employees to ensure that a departing employee does not deplete the employer’s workforce. It also may be wise to include an effective prohibition against disclosure or use of confidential business information, particularly in situations where employees are exposed to trade secrets or other private matters.

Because of the close scrutiny paid to restrictive covenants, employers wishing to include these provisions in their employment contracts should hire an attorney who not only knows Minnesota law, but who will also take time to understand the nature of the business at stake and tailor a restrictive covenant suited to the employer’s specific needs.

At Henson Efron, our attorneys have extensive experience drafting and enforcing restrictive covenants, as well as defending employees accused of violating such agreements and the employers that hire them. If you’d like to learn more about how our experience and knowledge can help protect your business, please contact Henson Efron.

The purpose of this article is merely to provide general information and may not be construed as legal advice.

Court Anderson
With diverse and extensive courtroom experience, I know how to sell a case. I relentlessly and aggressively work to convince judges and juries that your position is equitable and right. I guarantee that I will care for your case as if it were my own. I have handled well over 500 depositions and litigated cases in federal and state courts throughout the United States regarding:...
Benjamin (Ben) Hamborg
I begin with the end in mind when gathering evidence and investigating facts. Extracting the critical information, I craft it into a convincing story, whether it’s for a demand letter, a motion for summary judgment, or a trial. I advise and resolve complex legal and business disputes for both plaintiffs and defendants, on issues regarding: business torts construction defects breaches of contract intellectual property issues...
Eric Friske
Time is a limited commodity, and you have little to waste. To protect that time, I have my eye on the big picture from day one, gathering critical evidence and executing strategically for optimal, cost-effective results. As a business litigator, I understand that solving difficult disputes requires persistence and careful planning. Both inside and outside the courtroom, I will exhaustively build and develop your case,...