Case reveals another landmine in noncompete contracts (updated)

UPDATE: On June 29, 2018, the Minnesota Supreme Court reversed the pro-employer decision by the Court of Appeals. The Minnesota Supreme Court held: "Although a court may, in its discretion, grant equitable relief consistent with the terms of a private agreement, private agreements cannot compel a grant of equitable relief." This is good news for employees signing noncompete clauses—just because an employer says working at a competitor would cause it irreparable harm doesn't mean it's so. Read the opinion here.

Add another landmine to the long, and growing, list of reasons to tread very carefully before signing noncompete clauses in employment contracts. The latest: Your old employer can legally stop you from working at your new, competing job--as long as the contract says so.

The ruling comes from a Minnesota Court of Appeals case published on Monday, July 10th. A jury decided an employee violated his noncompete after he left one Minnesota medical-device maker to work at another. Normally, the penalty is damages (money) when an employee violates a noncompete.

But in this case, the noncompete allowed the previous employer to take things one step farther and block the employee from continuing to work at the new job. However, the trial judge said the previous employer could not stop him because he wasn’t causing the company “irreparable harm.” Those two words—irreparable harm—are important because that’s the typical standard judges use to decide whether they can make someone do, or not do something, what courts call “injunctive relief.”

But remember we told you this noncompete had some special words. Here they are: “In the event Employee breaches the covenants contained in this Agreement, Employee recognizes that irreparable injury will result” and the company “shall be entitled to an injunction to restrain the continuing breach by the Employee…”

Because of that language, the employer appealed the trial judge’s decision, arguing the employee contractually agreed he would be causing irreparable harm if he violated the noncompete, allowing the company to stop him from continuing to work at his new job. The Court of Appeals agreed with the former employer, making it clear employees have another reason to treat noncompetes so very carefully.

What does this all mean for you? It means if you sign a contract admitting you would cause irreparable harm by violating a noncompete, then your previous employer might have a big weapon in its arsenal. And this is why it is always wise to consider asking an attorney to review your noncompete agreement before you sign it.