Noncompetes and Prohibited Competition in Minnesota

What is a Non-Compete Agreement in Minnesota?

Non-compete agreements are common in contracts in Minnesota. If you have a non-compete agreement in a contract with someone else, it is a promise that you, or the other party, has made. A non-compete agreement is an agreement that one party will not compete with the other party to the contract. It could be part of a contract for the sale of a business. It could be part of an employment contract. Or it could be part of any other contract where the parties feel it is necessary.

What are the Terms of a Non-Compete Agreement?

The scope and other terms of the prohibition on competition should be laid out in the contract.

Duration

The length of time for which competition is prohibited should be set forth in the contract. For example, you could have an agreement to not compete with someone for two years.

Scope

The geographical locations in which competition is prohibited should be set forth in the contract. For example, you could have an agreement to not compete with someone in Hennepin County.

Conduct

The actions that constitute competition should be set forth in the contract. For example, you could have an agreement to not compete with someone in the sale of rocks and gravel.

The entire contract, therefore, may prohibit you from selling rocks and gravel, in competition with the other party to the contract, for two years in Hennepin County. Therefore, you would be permitted to sell rocks and gravel at any time in Ramsey County. You would be permitted to sell rocks and gravel in Hennepin County after two years and one minute. You would be permitted to sell baseball bats in Hennepin County at any time. But you would not be permitted to sell rocks and gravel in Hennepin County for two years. Lastly, damages may also be recovered against a third-party who interferes with a non-compete agreement.

Can a Non-Compete Agreement be Too Broad to be Valid?

Courts in Minnesota disfavor non-compete agreements because they put a restriction on free trade, which is generally against public policy. This does not mean that non-compete agreements are not enforceable however. Courts will enforce reasonable non-compete agreements. The key is, however, that they are reasonable.

Non-compete agreements are reasonable if:

  1. they serve a legitimate interest, and
  2. are not broader than necessary to protect that interest.

A court is more likely to uphold an agreement prohibiting competition for a year than for ten years. A court is more likely to uphold an agreement prohibiting competition in a ten mile radius, than one prohibiting competition in all of Minnesota. A court is more likely to uphold an agreement to not compete in a particular industry or trade an agreement not to compete in any industry or trade whatsoever.