In Minnesota the long-standing rule is that continuation of employment by itself, is insufficient consideration for a non-compete agreement entered into after employment has commenced. Minnesota employers have always been able to require new employees to enter into non-compete agreements in exchange for starting a job.
The Wisconsin Supreme Court ruled the continuation of at-will employment is lawful consideration for a non-compete agreement entered into with existing employees. No additional payments, training, promotions or other benefit is necessary. In Runzheimer International, Ltd. v. Friedlen, 862 N.W.2d 879 (Wis. 2015), the Court only evaluated the existence of consideration, not the adequacy of it.
In that case, the employee, Mr. Friedlen had worked for the company for more than 15 years without a non-compete agreement. In 2009, as part of a corporate initiative all employees were required to sign agreements containing provisions against disclosure of confidential information, solicitation of customers or competing against Runzheimer after their employment ended for any reason. Mr. Friedlen was given two weeks to review and consider the agreement. He was told he would be fired if he didn’t sign it. Mr. Friedlen eventually signed the agreement and continued working for Runzheimer for over 2 years. Mr. Friedlen subsequently was hired by a competitor and Runzheimer sought to enforce the non-compete agreement. The Wisconsin Supreme Court stated, “Runzheimer’s promise was that it would not fire Friedlen at that time and for that reason. Thus, Runzheimer performed immediately when it forbore its legal right to fire Friedlen at that time.”
The courts in Minnesota have taken the opposite stance, instead ruling that a current employee lacks bargaining power when presented with a non-compete agreement and told to sign it or be terminated. Under Minnesota law a current employee must receive a real benefit that is directly related to the signing of the non-compete agreement.
If you are a Minnesota-based employer who has employees who live or work in Wisconsin you may want to consider selecting Wisconsin as the governing law for employment agreements with non-compete provisions.