Non-Compete Legislation Update: Minnesota Remains Among States that Require Employers to Provide Advance Notice of any Non-Compete
Non-Compete Legislation Update: Minnesota Remains Among States that Require Employers to Provide Advance Notice of any Non-Compete

Two recent cases reaffirm that Minnesota remains among the small, but growing, list of states that require employers to provide advance notice of any non-compete to a potential future employee prior to the commencement of employment. In both Safety Center, Inc. v. Stier, No. A17-0260, 2017 WL 5077437 (Minn. Ct. App. Nov. 6, 2017) and AutoUpLink Techs., Inc. v. Lynn Clark Janson, No. A17-0485, 2017 WL 5985458 (Minn. Ct. App. Dec. 4, 2017), the Minnesota Court of Appeals affirmed that, if at-will employment is the only consideration offered, the non-compete must be presented to the employee before the offer of employment is accepted.

In Stier, the employee received a letter confirming her acceptance of an offer of employment and outlining the terms of her employment. When she arrived for her first day of work a week later, she was presented with a non-compete agreement, which she signed. After the employee resigned many years later, the employer sued the employee for violating her non-compete. Likewise, in AutoUpLink, the employee signed a non-compete approximately a month after he had verbally accepted an offer of employment and started training.

In Minnesota, if a non-compete is entered “at the inception of the employment relationship,” and is therefore ancillary to an employment agreement—in other words, as the Stier and AutoUpLink courts held, included as part of the offer of employment—no independent consideration is required beyond the offer of at-will employment for the non-compete to be enforceable. Independent consideration is required, however, where the non-compete is entered into after the employment relationship is established. In both Stier and AutoUpLink, the courts affirmed that the non-compete at issue was not enforceable because no independent consideration had been provided, as required for a non-compete entered into after the establishment of an employment relationship. See also Sanborn Mfg. Co. v. Currie, 500 N.W.2d 161, 164 (Minn. Ct. App. 1993) (concluding that “[w]hen the employer fails to inform prospective employees of noncompetition agreements until after they have accepted jobs, the employer ‘takes undue advantage of the inequality between the parties’”).

Non Competes Across the United States

Several other states have or are considering similar requirements, although unlike Minnesota, the requirements have been established by statute, not case law. Whether by case law or statute, the advance notice requirement appears designed to protect employees from the perceived disparity in bargaining power between employers and employees. The fear is that an employee will quit his/her job, perhaps even move to a new city or state, and then upon his/her first day on the new job be presented with an onerous non-compete. The employee may feel compelled to sign having already started the job.

In Oregon, a non-compete is void and unenforceable unless the employer informs the employee that a non-compete is required as a condition of employment in a written offer of employment at least two weeks before the employee’s first day of work. See ORS § 653.295(4)(b). Similarly, in New Hampshire, an employer must provide a copy of any non-compete to the potential employee prior to the employee’s acceptance of an offer of employment for the non-compete to be enforceable. See RSA 275:70 .

Here in Massachusetts, a similar provision has been included in pending non-compete legislation. See H.4434. Should it pass, the law would require employers to provide notice of any non-compete agreement to an employee by the earlier of a formal offer of employment, or ten business days before the commencement of employment. We will have to stay tuned to see if this provision ends up in any non-compete legislation that may pass next year.

In the rapidly changing business world, protecting a company's human capital and proprietary information is critical to maintaining a competitive edge. On this blog, Nutter's experienced Business Litigation and Labor, Employment & Benefits attorneys offer news and insights on all aspects of restrictive covenants and trade secrets—from analyzing a rapidly evolving body of case law, to summarizing new legislation and legislative efforts, to providing other need-to-know updates and more.

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