Many corporate employers vigorously seek to enforce such agreements, resulting in litigation, and they are an important part of the employment law picture. But changes may be coming, said V. John Ella, of Trepanier MacGillis Battina in Minneapolis.
A bill has been introduced in the Legislature that would limit restrictive covenants involving jobs below certain income thresholds and require the employer enforcing the agreement to pay the employee on a pro rata basis during unemployment forced by the covenant.
Ella thinks some curtailment of the use of restrictive covenants is called for in Minnesota. “It’s just tough [to litigate]. It’s uphill trying to get injunctive relief.” Many states have passed laws in the last five years that restrict the use of noncompete agreements, he said.
The federal government also is now weighing in on the appropriate use of non-competition agreements between employers and employees. President Joe Biden’s July 9, 2021, executive order asks the Federal Trade Commission to limit such agreements—which could lead to an expansion of federal regulation of agreements between employers and workers.
And a pending federal bill, The Workforce Mobility Bill of 2021, would restrict non-competition agreements. If it becomes law, the WMA would largely limit the use of non-competes to agreements signed as part of a sale of a business or a partnership dissolution or disassociation; give the FTC and U.S. Department of Labor dual enforcement authority; and give workers a private right of action to sue for violations of the law
“Small business owners think they need to protect their businesses. They don’t want employees to leave or compete,” Ella said. But there’s more — many employers are hurt and feel betrayed, he said. The good news is many of the cases resolve without litigation. As the law governing employee restrictive covenants gets more and more complicated, employer attorneys are cautious, which is good news for the workforce, he said.
Ella said another issue facing employers is defamation at work that may result in wrongful termination. With the assistance of social media, “fingers are pointing all over,” he said.
Executive compensation is also a practice area for Ella, the author of “Executive Employment Law — A Handbook for Minnesota Executives.”
Like this article? Gain access to all of our great content with a month-to-month subscription. Start your subscription.