Noncompetes for Existing Employees in Minnesota and Wisconsin
Employees are often asked to sign a noncompete agreement as part of the hiring process. In that circumstance, the consideration offered by the employer to make the agreement enforceable is generally the job itself. But the job itself may not be sufficient for existing employees.
Occasionally, employers will present an existing employee with a noncompete agreement for signature. In that situation, Minnesota courts have made clear that the employer must offer an existing employee more than continuing at-will employment to make the agreement enforceable. See Sanborn Manufacturing Co. v. Currie, 500 N.W.2d 161 (Minn. Ct. App. 1993)(“Proof of continued employment is not enough to show sufficient consideration for a noncompetition agreement.”). Many times the required additional consideration will take the form of a one-time monetary payment.
In Wisconsin, the Court of Appeals recently asked the Wisconsin Supreme Court to decide this same issue. In Runzheimer International, Ltd. v. Friedlen, the following issue was certified to the Wisconsin Supreme Court for determination: “Is consideration in addition to continued employment required to support a covenant not to compete entered into by an existing at-will employee?” Appeal No. 2013AP1392 (Wis. Ct. App., Apr. 15, 2014).
Friedlen was employed by Runzheimer for nearly 20 years when he was asked to and did sign a noncompete agreement. The agreement was a condition of his continued employment and his continued participation in the annual incentive plan. The Court of Appeals found that the agreement only provided Friedlen the opportunity to remain employed. Having later been terminated, Friedlen took a job with a competitor in violation of his agreement. Runzheimer then sued him to enforce the agreement. Now the Wisconsin Supreme Court will determined whether the agreement is enforceable.
Takeaway: Employers should be aware that enforcement of noncompetition agreements is determined on a state-by-state basis. If in doubt regarding the restrictive covenant laws in a particular state, it is a good idea to consult with legal counsel.