A recent noncompete case from Minnesota offers a cautionary tale for employers and cause for celebration for employees.
The case, Safety Center, Inc. v. Stier, (11/6/17), involved an employer that ran a treatment center for special-needs sex offenders. The employer sought to enforce its noncompete agreement against a former program director (Stier).
The noncompete agreement would have limited Stier’s ability to “provide services to [Safety Center’s] clients in any competitive capacity for … one year commencing from the termination of employment,” along with other post-employment restrictions.
Stier applied to the Safety Center on May 19, 2003. She also interviewed that day for a position. The next day, Stier was mailed a letter “to confirm [Stier’s] acceptance of the position [the Safety Center] offered [her].” The letter made no mention of a noncompete agreement. On Steir’s first day of employment in May 2003, she was presented for the first time a noncompete agreement, which she signed.
Fast forward to 2014 and Steir incorporated what would become a competing business. She later resigned from the Safety Center in 2015 to run her competing business.
The Noncompete Lawsuit
The Safety Center sued Steir and her business for various claims arising out of the breaching the noncompete agreement. Enforcement of the noncompete agreement, however, came down to when Stier signed it and whether continued employment provided sufficient consideration to enforce it.
The Court concluded the noncompete agreement was not enforceable. The Court reasoned that because Stier was not presented with or given notice of the noncompete agreement at the time the employment agreement was established, the noncompete agreement was not ancillary to the employment agreement. Further, the employer did not provide any independent “consideration” to support enforcement of the noncompete agreement.
Pay Attention to When Noncompetes are Signed
In our experience in representing both businesses and individuals in noncompete disputes, the circumstances presented in the above case happen all too often. For employers looking to avoid the circumstances, it is critical to closely examine your company’s process for making job offers and obtaining noncompete restrictions.
While this case addresses Minnesota law, it is also a cautionary tale for Michigan businesses as to whether additional consideration (beyond continued employment) is required to enforce a noncompete agreement. Or put another way, did the employee receive anything of value in exchange for signing the noncompete agreement? If not, then the agreement may not be enforceable. Michigan’s highest court has yet to speak on this issue, leaving the issue open for debate.
For more information about Michigan noncompete law, contact attorney Jason Shinn. Since 2001, Mr. Shinn routinely represents businesses and individuals in drafting, negotiating, and litigating noncompete disputes.