Recently, the Minnesota Court of Appeals in Safety Ctr., Inc. v. Stier (Minn. App. Nov. 2017) re-affirmed Minnesota’s rules pertaining to post-employment restrictive covenants that are “ancillary to employment.” That is, non-competition and non-solicitation agreements that come with the job at the outset, as distinguished from ones signed after employment has commenced. Those in the latter category generally require additional consideration, typically in the form of a bonus, raise or expansion of job duties. Under established case precedents, non-competes ancillary to employment must not only be signed before the new employee begins work activities, but they must also be made available for the employee’s review before he or she accepts an offer of employment. Failure to do either renders the non-compete legally unenforceable. This is a classic “trap for the unwary,” avoided easily by emailing the offer letter to the employee, along with an attached draft of the non-compete, and making clear in the offer letter that the employee’s signing of the non-compete is an essential, non-waivable condition of employment.
In the Stier case, the plaintiff employer prior to the first day of work wrote a letter to the defendant employee confirming her acceptance of the job offer, and outlining her projected compensation and other terms of employment. The letter conspicuously made no mention of any non-compete. Although the employee’s recollection of the events differed from the letter, the court had little difficulty in affirming the district court’s judgment after trial in her favor. The case is notable for a second reason, namely that the defendant employee was employed a full 13 years before leaving to join a competitor. During her tenure with the company, she had advanced from the position of part time therapist to program director. In limited instances, Minnesota courts have found raises and promotions, especially for long-tenured employees, to qualify as a kind consideration substitute. See Witzke v. Mesabi Rehabilitation Services, Inc. (Minn. App. 2008) (enforcing non-compete lacking consideration that was signed eight months after employee started work, where employee stayed on with the employer for seventeen years, during which time he advanced within the company and was given increased job responsibilities). Unfortunately, it’s not clear from the reported decision if this argument was raised by the defendant employer and considered by the court. Assuming it was, as one must, the decision only underscores the disfavored nature of non-competition and non-solicitation agreements in Minnesota. And provides a useful reminder that in the world of non-competes, timing is everything.