Legal Question in Business Law in Minnesota

You can bind the employees to a Non-compete with the New Company so long as the agreement is signed BEFORE they begin employment with New Company and it is a CONDITION OF EMPLOYMENT.

To bind them to a Non-Compete re: OLD Company, it is considered a MID-STREAM Non-compete agreement and requires New Consideration ( $$) which must be paid to the contracting employee, and must be MORE than Nominal. I usually recommend at least $5K, or stock in the contracting company etc.

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s a Franchise Attorney who as dealt with hundreds of non-competes, I must respectfully disagree with my colleague. Since you're offering employment via the new company, that would be more than sufficient consideration to support the non-compete. There are also countless companies that discover the advantages of using a non-compete, "mid-stream," to quote my colleague. They simply have all employees sign them, no stock, no $5k payment. Continued employment is something all employees are looking for in any at will employment relationships where either party can terminate at any time for any reason. Consult with a good business or franchise attorney in your area for specific advice.

Mr. Franchise - Kevin B. Murphy, B.S., M.B.A., J.D.

Franchise Foundations, a Professional Corporation

I am guessing this is a follow-up to the question you posted a couple of days ago. Without more information it is difficult to determine what is exactly going on. So any advice you get from this forum is going to be very general and is not enough for you to rely on to protect your company. Non-compete agreements are legal in Minnesota, but they are disfavored by the courts. So you need to make sure they drafted and executed properly or they are not going to be enforceable.

With that being said, I recommend that you make it a clean break. Draft and execute termination agreements with the EEs leaving the old company, and then draft and execute new agreements with these EEs coming to the new company.

I have to respectfully disagree with Mr. Murphy. I understand his "at will" argument, but Minnesota courts have held that on going employment is not adequate consideration for a non-compete agreement. Minnesota and California law vary on the enforceability of non-competes. California law has basically made them unenforceable.

I seriously doubt that a court is going to enforce the old company's non-compete agreement even if you have them sign some sort of acknowledgment. You seem to want it both ways. On one hand they are two different companies, but on the other hand the companies are so closely affiliated they should be considered one company. A judge is not going to enforce a non-compete for the benefit of a company where the Ee has not worked for a period of time.

I am not sure, however, why you would have to worry at this. If there is a enforceable non-compete with new company wouldn't that prevent the Ee from competing with the old company. I am assuming the Ee are performing identical services in the same area. If this is not the case the old company's non-compete is not going to be enforceable for another reason. Technically, once the the Ee starts working for the new company he could be violating the old company's non-compete.

You really should consult with an attorney or the non-competes are not going to be worth the paper they are printed on.