ARTICLES

Do You Really Need a Non-Compete?

Non-Competition Agreements, commonly known as “Non-Competes”, have an important place in the business and professional world. However, not every business needs to have its employees or independent contractors bound to a Non-Compete. Depending upon the needs of the business, it may be better served by a Non-Solicitation Agreement, commonly known as a “Non-Solicit”, in lieu of a Non-Compete.

A common misconception is that Non-Competes are unenforceable. A Non-Compete is generally enforceable in Minnesota if it satisfies two requirements: (1) it is narrowly tailored, meaning the scope is limited such that it accomplishes legitimate business interests and no more, and (2) it protects trade secrets, confidential information and goodwill that are entitled to such protection. One of the ways a Non-Compete may be narrowly tailored is by its geographical scope, which can vary widely among different types of business. While a business that sells widgets throughout the Twin Cities may be able to enforce a Non-Compete with a geographical limitation that includes Hennepin and Ramsey counties, a medical practice may only be able to enforce a Non-Compete for a physician that encompasses a radius of a few miles from the practice’s location. Nonetheless, the geographical scope is of little relevance if the information a business is attempting to protect is generally known throughout the business’s industry or profession, or there is no goodwill to protect.

Non-Competes almost always include Non-Solicits. However, Non-Solicits have value by themselves without the heightened requirements of a Non-Compete. Non-Solicits are not constrained by the narrowly tailored limitations of Non-Competes. Hence, Non-Solicits are generally broader and courts tend to enforce Non-Solicits to a greater degree and often for longer periods of time. Moreover, Non-Solicits have fewer hurdles to implementation. For example, the timing of Non-Competes can be tricky. An employee must sign a Non-Compete prior to starting any work. If an employee signs a Non-Compete, even after only working for as little as a few hours or a day, the employee must be given independent and meaningful consideration (usually in the form of monetary consideration) for the Non-Compete to be enforceable. Non-Solicits have no such requirement. An employee can sign a Non-Solicit at any point during his or her tenure.

When contemplating whether a Non-Compete is appropriate for a particular setting, the first question one must consider is what is in need of protection? Is the business worried about a key individual starting a competing operation across the street and utilizing the goodwill the former employer has spent years building? Alternatively, is the business worried about the dissemination of its customer or vendor lists or other proprietary information regarding its business operations or the solicitation of key employees? If the concern relates to a key individual, a Non-Compete is appropriate. Likewise, in the alternative, if the greater concern relates to the information or solicitation, a Non-Solicit is more appropriate.

If a business is more interested in protecting its information or relationships, a Non-Solicit is likely a better choice than a Non-Compete as it has fewer pitfalls, is probably not viewed with as much animosity by employees and will provide the protection that is actually necessary.