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Growing number of employees subject to non-compete agreements

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Ridder and Singleton
Former Pioneer Press publisher Par Ridder, left, with his boss at the time, Dean Singleton, CEO of the newpaper's new owner, MediaNews Group. Now the two are in a heated battle over Ridder's defection to the Minneapolis Star Tribune.
MPR Photo/Annie Baxter

Occasionally, disputes about non-compete agreements go public in a big way. Witness the legal battle between the Pioneer Press and Star Tribune. The Pioneer Press has gone to court to try to block former publisher Par Ridder from running the Star Tribune.

In most cases, though, disputes involving non-compete agreements don't get much attention. People don't like to talk publicly about their battles with past employers. And non-compete disputes usually don't end up in court, anyway. They're resolved by acerbic attorneys exchanging nasty letters.

But if there is a valid non-compete agreement, it can prevent a former employee from working for a competitor, typically for a year.

Your ex-employer will often sue your new employer. And your new employer will say, 'I don't need this headache. I know the way out: Just fire this employee.'

"It's kind of in vogue to have non-competes," says attorney Marshall Tanick. "They're kind of stylish these days. 'How come we don't have a non-compete?'" 

Marshall Tanick is one of many local employment law attorneys who say non-compete agreements are spreading, as are the efforts of employers to enforce them -- and attempts of employees to escape them.

"There seems to be about one-fifth to one-third more cases these days than there has been over the past few years," says Tanick, who has been litigating non-compete agreements for about 30 years. He has represented both employers and employees.

Tanick says more and more employers are making employees sign non-compete agreements to keep them from taking critical information like customer lists or trade secrets to competitors. 

"They've expanded to the retail service industry," says Tanick. "A lot of non-compete cases lately have come up in the cosmetology business, beauty care business." 

Tanick says the list goes on: "financial planners, financial consultants, doctors, dentists, veterinarians."   Technology is a major reason for the increasing use of non-competes. Employment law attorney Wayne Moskowitz says a company's secrets can easily wind up on a memory device about the size of a pack of gum or even a postage stamp.  

"When they realize that an employee can copy vast amounts of information to a thumb drive, then they wake up and see the issues," Moskowitz says.   In 2005, a national survey of 408 companies by the Society for Human Resource Management, found that about half the firms used non-competes for some or all employees. 

There's not much most of us can do if we're presented with a non-compete agreement when we're offered a job. Accept it -- or pass up the job. Attorney Nancy Brasel says lots of employees aren't even aware they're subject to a non-agreement agreement.

I've litigated against and represented many, many employees who were not aware they had a non-compete, because they signed it at the beginning of their employment and really didn't think about it," says Brasel.

Meanwhile, Brasel says employers are trying to be more consistent in enforcing non-competes, hoping a track record of steady  enforcement will help non-compete agreements stand up in court when they really matter to a company.

Employment law attorney Stephen Cooper says without a non-compete, employees are free to take most of what they learn on a job from one employer to the next.  

"Legally and practically, you can take virtually all knowledge which would be commonplace in your position," Cooper says. "You can take knowledge of who your customers are, and what you learned how to do and the skills you developed."

But Cooper says a departing employee doesn't have free rein, even when there is no non-compete. 

"The law prohibits trademark infringement whether there is a non-compete or not. The law prohibits unfair trade. The law prohibits the use of trade secrets whether there is a non-compete or not," says Cooper. "The non-compete goes above and beyond that. The non-compete will say things like you may not contact or sell to your previous customers."

Cooper and other attorneys who often represent employees trying to escape non-compete agreements say some companies are slapping the restrictions on employees who clearly should not be subject to them. Companies may do that to compromise the ability of employees to bargain salary increases. 

Cooper says he has even seen instances where a company fires an employee and then tries to enforce a non-compete agreement. 

"The employer has decided they don't want this person working for them anymore. But they don't want them working for anybody else either," he says.

Cooper says many employees don't have the will or money to fight non-competes.  And some workers caught in non-compete disputes lose their new job.

"Your ex-employer will often sue your new employer," says Cooper. "And your new employer will say, 'I don't need this headache. I know the way out: Just fire this employee.'"

But attorney Marshall Tanick says there is hope for an employee caught in an unreasonable non-compete agreement.

"Courts have to decide what is fair and just," says Tanick. "Just because people have an agreement doesn't mean a court is going to enforce it."

States vary in their laws regarding non-competes. Minnesota allows such agreements. But a judge can void or alter an agreement with an unreasonable duration or restrictions.