July 2015
By: James B. Sherman, Esq.
I often hear business people say, incorrectly, that noncompetition agreements and other restrictive covenants are "not worth the paper they are written on." In truth, these agreements are frequently upheld in court so long as they are carefully drafted. However, it certainly is accurate to say that noncompete, nonsolicitation, confidentiality and similar agreements between employers and their employees often receive a great deal of scrutiny in court. A recent decision from the Minnesota Court of Appeals illustrates this point and the importance of dotting I's and crossing T's when it comes to restrictive employment agreements.
The case involved an employee of roughly three years who was asked to sign a “Nonsoliciation and Confidential Information Agreement” in connection with the employer’s installation of a new computer system that gave employees access to detailed customer information. The agreement applied both during employment and for a period of two years after employment ended. Due to its duration the agreement fell under Minnesota’s statute of frauds, which applies to any contract which by its terms cannot be performed within one year from its making. But Minnesota’s statute of frauds (Minn. Stat. § 513.01) not only requires that such an agreement be in writing, as the appellate court noted it specifically requires that the written agreement “express the consideration” given in exchange for the contract. In this particular case, because the employer’s nonsolicitation agreement did not specify, in writing, what consideration (i.e. thing of value) was being given to the employee in exchange for her promise not to solicit customers, the agreement failed to satisfy Minnesota’s statue of frauds and, therefore, was unenforceable.
The employer in this case tried to argue that its consideration to support the nonsolicitation agreement was giving the employee access to its customer information, which would not have been done had the employee not signed the agreement promising not to solicit customers. The employer's failure to include this, in writing, in the nonsolicitation agreement itself proved fatal because it did not comply with Minnesota’s very explicit statute of frauds. Had this detail not been overlooked, perhaps the outcome of this case could have been different.
Questions? Attorney James Sherman of our Minneapolis office has extensive experience drafting, enforcing, and defending against enforcement of noncompetition, nonsolicitation, trade secret and other restrictive employment agreements. He may be reached by email at jasherman@wesselssherman.com or call (952) 746-1700.
By: James B. Sherman, Esq.
I often hear business people say, incorrectly, that noncompetition agreements and other restrictive covenants are "not worth the paper they are written on." In truth, these agreements are frequently upheld in court so long as they are carefully drafted. However, it certainly is accurate to say that noncompete, nonsolicitation, confidentiality and similar agreements between employers and their employees often receive a great deal of scrutiny in court. A recent decision from the Minnesota Court of Appeals illustrates this point and the importance of dotting I's and crossing T's when it comes to restrictive employment agreements.
The case involved an employee of roughly three years who was asked to sign a “Nonsoliciation and Confidential Information Agreement” in connection with the employer’s installation of a new computer system that gave employees access to detailed customer information. The agreement applied both during employment and for a period of two years after employment ended. Due to its duration the agreement fell under Minnesota’s statute of frauds, which applies to any contract which by its terms cannot be performed within one year from its making. But Minnesota’s statute of frauds (Minn. Stat. § 513.01) not only requires that such an agreement be in writing, as the appellate court noted it specifically requires that the written agreement “express the consideration” given in exchange for the contract. In this particular case, because the employer’s nonsolicitation agreement did not specify, in writing, what consideration (i.e. thing of value) was being given to the employee in exchange for her promise not to solicit customers, the agreement failed to satisfy Minnesota’s statue of frauds and, therefore, was unenforceable.
The employer in this case tried to argue that its consideration to support the nonsolicitation agreement was giving the employee access to its customer information, which would not have been done had the employee not signed the agreement promising not to solicit customers. The employer's failure to include this, in writing, in the nonsolicitation agreement itself proved fatal because it did not comply with Minnesota’s very explicit statute of frauds. Had this detail not been overlooked, perhaps the outcome of this case could have been different.
Questions? Attorney James Sherman of our Minneapolis office has extensive experience drafting, enforcing, and defending against enforcement of noncompetition, nonsolicitation, trade secret and other restrictive employment agreements. He may be reached by email at jasherman@wesselssherman.com or call (952) 746-1700.
