Author: Jack Roberts, Roberts & Stotzheim, PLLC
Topic area: Law for Minnesota businesses and real estate communities
Blogging since: April 2010
Post excerpt from November 10, 2010: “The Minnesota Court of Appeals issued a decision yesterday regarding non-compete agreements and independent contractors that clarified the reach of the current common-law restrictions on non-competes.
Minnesota common law requires that a non-compete agreement, either as a separate contract or within another contract (such as an employment agreement), be supported by independent and adequate consideration. Put simply, the employee must receive something in return for giving up his or her right to compete against the employer. Typically, employers and employees agree to a non-compete as a requirement for hiring. The employee receives employment as consideration for his or her agreement not to compete.
“The ‘adequate consideration’ requirement typically prevents an employer from requiring employees to agree to a non-compete after employment is commenced because the employee is not receiving anything in return (i.e., no consideration) for his or her agreement not to compete. In yesterday’s decision, the Court of Appeals described the disparity of bargaining power in favor of the employer in these types of situations. The Court reinforced the requirement that a non-compete agreement entered into after an initial employment contract requires independent consideration (such as an increase in compensation).”