Tag Archive for: non-compete

Minnesota & Federal Trade Commission Seek to End Oppressive Noncompete Agreements

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On January 19, 2022, the Federal Trade Commission (FTC) proposed a rule that would broadly ban the use of noncompete clauses by employers with respect to employees, independent contractors, and volunteers. Specifically, the proposed rule would make it illegal for an employer to enter into any noncompete agreement. It would also bar any attempt to enter into a noncompete. It would even bar maintaining a noncompete agreement with a worker. And, under some circumstances, it prohibits employers from telling a worker they are subject to a noncompete agreement.

Employers use noncompete agreements across industries and job levels to limit the movement of employees, including, for example, hairstylists, teachers, and physicians. Often included in the initial employment contract, noncompete clauses typically block employees from working for a competing employer or starting a competing business within a certain geographic area for a specified time period following the termination of employment.

Noncompete agreements have a debilitating effect on employees. Oftentimes, potential employees are forced into signing noncompete agreements in order to obtain employment, with limited, if any, bargaining power on their end of the agreement. Noncompete agreements limit employees’ ability to practice their trade and stagnate competition in the broader economy. Research has shown that noncompete agreements negatively affect competition in labor markets and reduce wages for employees across the labor force, even those not bound by noncompete agreements. In other words, noncompete agreements harm labor market competition by stopping employees from seeking out better job opportunities and preventing employers from hiring the best talent.

By banning noncompete agreements, the FTC estimates an increase in wages by nearly $300 billion per year and expanded career opportunities for nearly 30 million Americans. The National Employment Lawyers Association (NELA), an organization of lawyers who, like Kitzer Rochel, fight for workers’ rights, supports the rule.

The FTC proposed rule falls within a nationwide trend toward banning noncompete agreements. Minnesota has also introduced a bill banning noncompete agreements, following states such as California and North Dakota.

If you have questions about noncompete agreements—or any of the proposed rules and legislation—please contact Kitzer Rochel today.

Ideas for Negotiating a Job Offer

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If you do not typically negotiate the terms of your job offer, you may want to consider doing so. There are many different aspects of a typical employment offer that you may be able to negotiate. If you do not, you may be selling yourself short.

Perhaps the biggest factor in negotiating an employment agreement is your salary or compensation for a job. During the initial interview, an employer will frequently ask what salary level you are seeking. This is the first misstep in most initial employment negotiations. You are not obligated to provide your prior salary history and doing so may hurt your negotiating position. At the same time, it is unwise to be rude or curt in denying to share salary information if you are trying to persuade an employer to hire you.

Here are some tips when facing this question:

  • Redirect: Ask what salary range the employer is offering (or what range a recruiter believes is realistic). Or say, “I am looking for roles in a range between $__ and $__.” Focus on what you are looking for, not what you earned in the past.
  • Ask for more information: Respond by saying that you need more information about the specific role or job you are seeking before you can comfortably answer what salary range you are seeking.
  • Directly address the question: You can politely say that you are not comfortable sharing that information or that it is private. In fact, sharing prior salary history can lead to direct or indirect discrimination. For instance, it well documented that women and minorities are generally paid less than men and non-minorities. Allowing companies to dictate pay based on previous salaries perpetuates these discriminatory norms. In some circumstances, seeking prior pay information may even violate the law. You should contact an employment attorney if you have questions about that.

At some point, if things move forward, you will be offered a position with a salary or a salary range. Of course, you will want to negotiate this term to get the best salary you can. Frequently, though, there is not much room beyond the initial salary offer unless there are unique circumstances (i.e. you have a competitive job offer, etc.).

Once you have been offered a job and settled on a salary, you can still negotiate several terms beyond salary. Many people overlook this potentially lucrative opportunity. Here are some terms to consider negotiating:

Sign-on bonus: these are more common than negotiating a salary increase, and are frequently agreed-to when job candidates push for them. This can make a significant financial difference when comparing competing job offers.

  • Vacation: negotiating one or even many additional vacation days per year is a very common term that employers are willing to give.
  • Stock options: Some companies offer stock options as part of an employment agreement. These can be very valuable depending on the financial health and future of the business.
  • Flexibility: working from home (even a few days a year or something like that), variable work hours, limited travel, etc.
  • Dues/fees: if you are obligated to maintain membership dues or association fees, negotiate your employer covering these. We have even seen employers pay for memberships at social or health clubs for the career networking value that the company receives. Similarly, you can negotiate paying conference attendance fees or travel costs. Be specific about these terms up front rather than waiting until after you are hired.
  • Tuition reimbursement: This is another common term for employees looking to advance their career—it can be a win-win for the employer and employee. But be very careful about provisions that require you to pay back any reimbursement amount if you leave the company.
  • Non-monetary items: Aside from terms that cost a company money, you can get creative about other elements of the job that help you advance your career trajectory. For instance, your job title or the number of employees that report to you may be items you can negotiate. This can make a significant difference in promotional opportunities down the road and can help you gain valuable experience.

You should also consider negotiating severance or separation terms as part of your initial job offer or employment agreement. We frequently have clients who quit, are laid off or are terminated and attempt to negotiate severance pay. In almost all cases, employers’ lawyers argue that those terms should have been negotiated at the outset of the employment relationship. They are right. As an employee, you are much better off having a contractual right to severance pay when you are let go than if you do not.

Many employers today require some form of non-compete agreement, non-solicitation agreement, or other restriction on your ability to work upon departing from the company. You can use that to negotiate some form of separation pay in exchange for agreeing to these restrictions. For instance, if an employer requires you to sign a one year non-compete, you can suggest that they include one year of severance pay if you are terminated under certain circumstances. This helps protect you in the event that you are suddenly fired and then bound by a restrictive covenant that limits you in finding a new job.

***The law on non-competes and other restrictive covenants is complicated and changes regularly. The same is true for law governing employment agreements. There are many factors involved in deciding whether to negotiate an employment agreement, and you should seek legal advice from an experienced employment lawyer before signing (or even negotiating) such an agreement. It is important to fully understand what you are agreeing to before you agree to anything.

Excessive Use of Overly Broad Non-Compete Agreements being Called into Question

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Non-compete agreements, a certain type of restrictive covenant, have been somewhat common between employers and employees for decades. But the use of non-competes, particularly very broad and restrictive ones, has spread expansively in recent years.

Initially designed to be a fair tool for employers to maintain certain key trade secrets and essential client bases, non-competes were originally contracts that employees voluntarily entered into and were paid a fair amount in exchange for doing so. Over the years, however, non-competes have become virtually mandatory and restrict employees from being able to leave their employer in exchange for nothing—typically only in exchange for “continued employment,” which is essentially value-less when employment is “at will.”

Moreover, while non-competes used to be limited to certain fields—such as highly technical scientific or intellectual property fields, or valuable high-level sales roles—they are now becoming common place in almost every conceivable area of work, from delivery drivers to journalists to hair stylists.

The proliferation of non-compete agreements, and their use as a tool to pressure employees into staying for worse terms and conditions of employment are finally starting to be called into question. As a recent article notes, the use of non-competes is becoming “outrageous,” and is catching the attention of attorneys general, the media, and hopefully courts as well.

Non-competes have historically been enforced quite strictly and rigidly, especially in Minnesota. If you are asked to sign a non-compete, or if you have already signed one and have questions about it, please contact us today because there are many nuances and laws that may apply, and the field may be changing significantly in the near future.

Minnesota Court of Appeals Holds Restrictive Covenant against Employee Not Enforceable

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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.