Category Archives: Post-Employment Restrictive Covenants

Quirky Question #237, Badger your employees to sign new non-competes?

Question:

We are a Wisconsin employer that has recently lost a number of employees to competing companies in our area. We’re worried our competitors are getting an unfair edge in the market, basically using employees we’ve spent time and resources training to compete against us. It doesn’t seem fair. Unfortunately, it didn’t occur to us to have our employees sign non-compete agreements back when we hired them. In light of all this, we wish to have our remaining employees sign non-compete agreements as a condition of their continued employment with us. If an employee refuses to sign, then we plan to terminate him/her. Assuming we craft a reasonable non-compete agreement, is there any problem with this course of action? Answer→

Quirky Question #226, One-Size-Fits-All National Non-Compete?

Question:

We are a business headquartered in Minnesota.  We plan to expand into other states but have concerns with investing the time and money in training new employees in a very competitive industry.  We currently have our Minnesota employees sign a form non-compete agreement.  Can we use that same form agreement for other states where we are expanding? Answer→

Quirky Question #212, Montana Non-Competes

Question:

We are an accounting firm and recently fired an employee at will.  We have always understood that Montana law disfavors non-competition agreements, therefore, our employment agreement provides that if the accountant provides services to our clients within six months of leaving, he will pay us the profits from such an engagement which are stipulated to be 75% of gross revenues.   Since our former accountant is not completely prohibited from competing, isn’t this agreement enforceable? Answer→

No Poaching Allowed: Antitrust Issues in Labor Markets

The article below addresses another aspect of employees moving from one company to another — agreements between two or more competitive corporations not to solicit, or hire, each other’s employees.  The article below first appeared in Antitrust, Vol. 26, No. 3, Summer 2012. © 2012 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. Answer→

Quirky Question # 197, Successor Company’s Right to Enforce Non-Compete

Question:

We recently acquired a small company. We felt it would be a good fit for our considerably larger enterprise in part because we picked up a geographic sales territory in the Midwest that we previously were not covering very effectively.

We did not spend a ton of time scrutinizing the key employees’ contracts as part of our due diligence process but we generally familiarized ourselves with their agreements. We were pleased to see that the employees we considered most important to the future success of the business we acquired had restrictive covenants that would tie them up for three years if they resigned their employment.

After we acquired the company, we imposed our standard comp plan on all of the acquired company’s employees. For some folks, this resulted in a salary increase; for others, not so much. We also changed the benefit plans around a bit, admittedly not in ways the employees are excited about.

We are less than six weeks into our ownership of this company and four of the key employees quit to join a significant competitor. When we contacted them to advise that they were in breach of their employment agreements, their lawyer responded immediately by stating that the agreements had long since expired, and that there was no assignment provision in the contracts. This can’t be correct, can it? Answer→

Quirky Question # 195, Uniform Policies for Nationwide Employer — Which State’s Law Applies?

Question:

Our company does business in all 50 states. To the greatest extent possible, we like to have uniform employment policies for our employees, wherever they may be located. As you know, this goal is frustrated somewhat by the differences among state employment laws.

We have been considering using a standard employment agreement for all of our exempt employees. Our plan is to include a choice of law provision identifying Minnesota as the state whose law applies. We also want to make Hennepin County our choice of venue. It strikes us that the inconvenience of litigating in Minnesota may deter some disgruntled ex-employee from bringing suit. Will this approach fly? We’d appreciate any guidance you can provide. Answer→

Quirky Question # 188, Enforcing Non-Solicitation Agreements

Question:

Like many companies, we are in a highly competitive industry.  We spend a lot of time training our sales employees to perform their jobs, at a considerable expense to our company.  Consequently, we have all of our sales personnel execute a non-compete/non-solicitation agreement at the commencement of their employment.

Several of our employees have joined a company that we recognize is not competitive with ours.  But, it sure seems like they are recruiting our other sales people to join them.  A number of employees who have been friends for some time have jointly moved to this other company.

Do we have a legitimate claim based on the restrictions contained in the non-solicitation agreement?  We have to stop the bleeding.  This is especially true right now because our own company has been struggling (layoffs, declining stock price, etc.), so it probably isn’t too difficult to convince our employees that they might have a better future elsewhere. Anything we can do? Answer→