In a potentially significant case, the Minnesota Court of Appeals held that a non-solicitation agreement was not enforceable because it did not include specific reference to consideration in exchange for the agreement not to solicit within the agreement. The case, JAB, Inc. v. Naegle, resulted in the employee’s non-solicitation agreement being unenforceable.
Under basic principles of contract law, a contract (including an agreement for a non-compete or non-solicitation) requires consideration. This means that both parties receive something in return–here, the employer received the agreement not to solicit employees after the employee left the company, but the agreement did not provide anything to the employee in return. The important rule from Naegle is that, when a contract that cannot be fully performed within one year (such as a two year non-solicitation agreement), then the contract must include express reference to the consideration within the contract or it is not enforceable.
Click here for a copy of the full Court of Appeals decision. If you have questions about a non-solicitation agreement, a non-compete agreement, or any other employment law questions, please contact Teske Katz Kitzer & Rochel today for a free consultation.