Sanborn Manufacturing Co. v. Currie
1993 Minn. App. LEXIS 584, 8 I.E.R. Cas. (BNA) 1012, 500 N.W.2d 161 (1993)
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Rule of Law:
A noncompetition agreement is unenforceable if it is presented after an employee has accepted an offer of employment, unless it is supported by new, independent consideration beyond the terms of the original employment agreement.
Facts:
- In April 1988, Charles Currie and Sanborn Manufacturing Company reached an oral agreement on the terms of Currie's employment as a marketing manager, with no discussion of a noncompetition agreement.
- On May 2, 1988, Sanborn sent Currie a written employment offer detailing his compensation package, which he accepted.
- In reliance on this agreement, Currie quit his job at Ingersoll-Rand and signed a purchase agreement to sell his home in North Carolina.
- On May 23, 1988, the day before his employment was to begin, Currie flew to Minnesota where Sanborn presented him with a noncompetition agreement for the first time.
- The noncompetition agreement stated that its consideration was the same compensation package Currie had already accepted in the original offer.
- Believing he had no other choice, Currie signed the agreement and subsequently worked for Sanborn for over four years, receiving pay raises and increased responsibilities but no formal promotion.
- After four years, Currie received a job offer from Quincy Compression, a company that manufactures products for a different market segment than Sanborn.
Procedural Posture:
- After Charles Currie gave notice of his intent to work for a competitor, Sanborn Manufacturing Company filed a lawsuit against him in a Minnesota trial court.
- Sanborn sought a temporary injunction to prohibit Currie from breaching the noncompetition agreement.
- The trial court granted the temporary injunction in favor of Sanborn.
- Charles Currie, as the appellant, appealed the trial court's order granting the temporary injunction to the Court of Appeals of Minnesota, with Sanborn Manufacturing Company as the respondent.
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Issue:
Is a noncompetition agreement enforceable when it is presented to an employee after they have already accepted an offer of employment, without providing new, independent consideration beyond the terms of the original offer?
Opinions:
Majority - Crippen, Judge.
No. A noncompetition agreement presented after an offer of employment has been accepted is not ancillary to the employment contract and must be supported by independent consideration to be enforceable. Noncompetition agreements are disfavored at law as they restrain trade. When an employer fails to inform a prospective employee of a noncompetition agreement until after the job offer is accepted, the employer takes undue advantage of the unequal bargaining power between the parties. Here, Currie accepted Sanborn's offer before being asked to sign the noncompete; therefore, independent consideration was required. Continued employment alone is not sufficient consideration. The raises and increased responsibilities Currie received were attributable to good performance expected under the initial employment agreement, not new benefits provided in exchange for signing the noncompete. Because Sanborn provided no evidence of independent consideration, the agreement is unenforceable, and Sanborn has no likelihood of success on the merits.
Analysis:
This decision reinforces the legal principle that noncompetition agreements presented after an employment contract is formed must be supported by new, tangible consideration. It clarifies that ordinary incidents of an ongoing employment relationship, such as standard pay raises for good performance or continued employment itself, do not constitute sufficient independent consideration. The ruling serves to protect employees from being coerced into signing restrictive covenants after they have already materially changed their position (e.g., quit a prior job) in reliance on an initial offer. This precedent makes it more difficult for employers to enforce post-hire noncompetes unless they provide a clear, additional benefit to the employee in exchange for the restriction.
