The last two years have given many workers a chance to reassess their priorities, whether by the loss of a job, a layoff during quarantine periods, or just through moments of clarity in what has been a time of stress. The period now known as “The Great Resignation” has resulted from the pandemic era, and many employees have moved on from steady jobs to seek new employment with businesses or organizations that provide better opportunities financially, promote purpose-driven work, or give greater options for personal growth. But before you click the submit button on that online application for your next opportunity, or sign off on that offer for your dream job, it’s best to first examine any obligations to your previous employer which may prevent you from immediately moving on.
In the blur of accepting your last job, you may have signed an employment agreement with terms preventing you from utilizing company material or disclosing confidential information of your employer. Where things get more complicated are when those same agreements contain noncompete clauses, or as part of the offer, have stand-alone contracts prohibiting competition against the employer for up to three years extending in an area up to 100 miles away from that employer’s office. Therefore, it is crucial before making that decision to move on to new employment to confirm if those clauses exist in any agreement between you and your employer and how they might limit your next opportunity.
Generally, noncompete agreements are viewed with a great deal of skepticism from courts, and are seen by some as restraints on trade unless narrowly tailored to the employment relationship and limited in time and geographic scope. For instance, in Minnesota, courts have upheld noncompete agreements for highly-specialized employees (think: engineers, doctors) that have timelines of up to three years preventing them from going to work for a competitor. Even those general employees who aren’t as specialized have been held to terms of 12 months or two years. However, if the noncompete clause or agreement doesn’t have a timeline, it likely is unenforceable.
The same holds true for areas of competition. Valid, enforceable noncompete clauses and agreements will have a limit on the geographic area of where the employee can open up a competing business or go to work for a direct competitor. It’s not uncommon to see distances of 50, 75 or even 100 miles being upheld. While these distances allow the employee to go elsewhere to continue their career, they also help prevent harm to the previous employer if that employee were to try to take their knowledge of the immediate market, and previous business contacts, to a competing company within that area.
In addition, it is important to check clauses relating to solicitation of co-workers from a previous employer, as that activity is often prohibited for a period of time after resignation. Further, as mentioned at the outset, retaining work product, company information, client databases, customer contacts and other business information via any means – physical or digital – is likely prohibited under the agreement, or is subject to court action by the employer.
While many workers have moved on to greener pastures, it’s likely those opportunities on the other side of the fence are similar to their previous employment. It isn’t uncommon during this time to see previous employers enforce the terms of a noncompete clause or agreement against their former employees who attempt to go to work for a nearby competitor. Such legal action can bring added stress and expenses to those employees looking to move on. In some cases legal action can cause issues for the new employer, jeopardizing the job offer or resulting in reassignment of the new employee into roles which comport with the applicable noncompete terms. That’s why even now, while the trend of transitory employees is at the forefront of the new business world, it is important for those employees to know what restrictions may apply to them, their former employer and their new workplace in the midst of this Great Resignation.
Simonson is an attorney with the Fryberger Law Firm focused on employment, labor, corporate and contract law. He believes in fierce but fair free market competition.