As a business owner, no doubt one of the biggest sources of pride for you is knowing that you have gotten where you are by always “playing the game” fairly. You’re no fool, and you know that trying to cheat the system or get an illegitimate step-up over your competition could leave a serious stain on your reputation and possibly take a chunk out of your profits. But life is not made up of black and white—it is all shades of grey.
So why is someone trying to sue you with claims that you have violated a non-compete agreement? Is it truly a violation that is legally enforceable? In some cases it may be a misunderstanding and sometimes it is worth the risk from a business perspective to see how dark the grey can get before it is deemed to be black. What can be done to defend yourself against a non-compete litigation case?
What is a Non-Compete Agreement?
A non-compete agreement is a contract between two parties in which one party agrees not to compete with the other for a certain period of time, in a particular geographical area, and/or within a specialized field. In most cases, these clauses are formed between an employee and their employer, and it says that the employee is barred from working with competitors that would otherwise hurt the employer’s business or profits. The idea is that the employer’s trade secrets, customer lists, the status of current contracts, pricing structures, sales strategies, and overall business plans and strategies are valuable and require a buffer zone of legal protection from the prying eyes of other similar companies that are competitors.
What Can You Do in Your Defense?
If a competitor is accusing you of violating a non-compete agreement, it is probably because they believe you have hired one of their employees illegitimately. To defend yourself and your company from these accusations, consider some of these common defenses with a professional business litigation attorney:
- Disfavored. Minnesota’s courts ‘disfavor” non-compete agreements generally as a restraint on trade, although they are lawful if narrowly tailored to protect a legitimate business purpose.
- Unclean hands: If your accuser has acted in an unfair or unethical manner and then asks the court for help to do what is fair and “equitable”, the courts may say she has “unclean hands” and not provide the help asked for. The courts will generally only provide fairness and equity to those who have acted fair and equitable in the first place.
- Vagueness: Non-compete agreements should be limited in scope, geography, and temporally (time)to be enforceable. One that is too vague in terms of duration and location can be rewritten by the courts in MN but only if the court chooses to rewrite it and make it permissible. This is called the “blue pencil” doctrine because the court can use its “blue pencil” to actually change the terms of an unlawfully overbroad or vague non-compete contract and make it lawful by rewriting it, apparently with a blue pencil.
- Unduly burdensome: If you hired someone who has only specialized in your business all their life, you and your competitor might be the only people who would hire them in your city. Therefore, adding them to your team after they left your competitor’s business may not be a violation of a non-compete agreement, as it allows the employee to find necessary employment without excessively burdening restrictions. However, if the contract was agreed upon with the employees eyes wide open and fully informed, while also protecting a legitimate interest of his former employer, then a non-compete can be upheld and you may be violating it even if it forces the employee to find work on the other side of the state or even country in some circumstances.
- Invalid: Unless the employee enters into a non-compete as a condition of her employment when hired, there must be something separate given to an existing employee of value to make the non-compete agreement binding on an already employed employee. The employer cannot just say “sign this” one day without anything given for doing so, at least a minimal benefit or bonus may suffice, but it has to be something of value that is exchanged to make the non-compete agreement binding and valid.
The above are just a few ways an apparently valid and binding non-compete agreement may not be valid or binding and can be used as defenses if litigation ensues. The truth of the matter is that all of these could work, or none of these could work, depending on your situation. The courts examine each case under its unique facts and decide them on that basis so it is important to team up with a Minnesota business litigation lawyer from MKT Law. We have years of experience handling complex cases for our clients and understand the importance of upholding your rights as a business owner. If you would like to know more about how we can help you during this tricky time, feel free to contact us today.