Certain industries, like salon and mortgage, are heavily dependent on the relationship the company builds with the client. Customarily, the employer, acknowledging and aware of the importance, enters into noncompete agreements with its employees. Are those noncompete agreements enforceable? The answer is Yes.
According to the Minnesota Supreme Court, a noncompete clause is valid if it is
(1) necessary for the protection of the business or goodwill of the employer;
(2) not more restrictive than reasonably necessary to protect the employer's business given the nature of that business and the extent of the duration and the geographic scope of the restraint; and
(3) not injurious to the public.
Application of these factors is on a case-by-case scenario. With the increased mobility of clients in the mortgage industry, a business in Hugo could enforce a noncompete agreement against an ex-employee who relocates to Lakeville.
My general advice on duration of a non-compete is to not exceed 2 years. That is based on appellate court opinions and practical business life.
I rarely see a noncompete clause voided as being injurious to the public. The provision of services of all types are usually readily available. Simply prohibiting an ex-employee from benefitting from your work, training, and resources for the benefit of anew employer is not per se injurious to the public.
With the high demand for employees, noncompete clauses may be more useful than ever. If you wish to learn more about this tool and how it can help you, feel free to give me a call.
