Non-Compete Agreements
INDEPENDENT CONSIDERATION IS REQUIRED IF A NON-COMPETITION AGREEMENT IS NOT ENTERED INTO AT THE BEGINNING OF OR ANCILLARY TO THE EMPLOYMENT RELATIONSHIP.
A prospective employee applied for a part-time position with a company. The applicant was offered and accepted a full-time job. The employer sent a letter confirming the employee’s acceptance of the position but did not mention that it wanted the employee to sign a non-compete agreement. The employee was not given the non-compete agreement until her first day of work. The employee left several years later to start a competing business, and the employer sued claiming she was violating her non-compete.
The trial court found that the employee’s non-compete agreement was not ancillary to her employment relationship because she entered into the employment relationship before the employer gave her the non-compete agreement. The trial court also found that no independent consideration supported the signing of the non-compete agreement, and that it was not enforceable.
The Minnesota Court of Appeals explained that independent consideration is not required if the employer and employee enter into the non-compete agreement at the inception of the employment relationship. However, if the non-compete agreement is not entered into at the inception of the employment relationship (i.e., is not ancillary to the employment relationship) independent consideration must be given to the employee to make the agreement valid and enforceable. In this case, the Minnesota Court of Appeals held that the agreement was not ancillary to the employment relationship because is was not signed at the time the offer of employment was made and accepted. Therefore, the agreement needed to be supported by independent consideration. It was not, so the agreement was held to be invalid.
If you have questions about non-competition agreements or any other employment law issues please contact Farrish Johnson’s employment law attorneys Will Partridge, or Joseph Gangi at 507-625-2525.
