Does a Material Job Change Void a Noncompete?

What does Minnesota law say about a noncompete after a job change?

No Minnesota statute or appellate decision I found voids a noncompete just because the employee’s duties changed. Minnesota courts instead ask two questions about a covenant signed before the 2023 ban: was it supported by consideration, and is it reasonable given “the nature and character of the employment.”

The closest case I found is Federated Mutual Insurance Co. v. Pehrson, No. CX-99-522 (Minn. App. Aug. 31, 1999), an unpublished Court of Appeals decision that other courts are not required to follow. A sales representative signed a noncompete in California and later transferred to a Minnesota territory without signing a new one. The district court ruled that the transfer rescinded the old contract. The Court of Appeals reversed that ruling and sent the noncompete claim back for trial, because “there is at least a fact question as to whether the contract was merely modified when Pehrson moved back to Minnesota, or whether it was mutually abandoned, cancelled, or rescinded.”

That reasonableness language comes from the Minnesota Supreme Court’s test in Bennett v. Storz Broadcasting Co., 134 N.W.2d 892 (Minn. 1965). The court asks “whether or not the restraint is necessary for the protection of the business or good will of the employer,” and then whether the covenant imposes “any greater restraint than is reasonably necessary to protect the employer’s business.” A changed job feeds into both parts of that test, as the sections below show.

The phrase material change comes up in Massachusetts cases. In H&R Block E. Enters., Inc. v. Feldman, 92 Mass. App. Ct. 1129 (2018), the Massachusetts Appeals Court described “the so-called ‘material change’ doctrine.” Under it, the employee argued that “her continued employment with the same employer, but allegedly with markedly different job duties and terms, obviated the terms of” her earlier agreement. The arbitrator rejected that argument, and the court, reviewing the award only narrowly, affirmed the judgment confirming it. Massachusetts decisions do not bind Minnesota courts. I suggest not assuming the doctrine applies here, because the Minnesota cases below decide job-change disputes through consideration and reasonableness instead. My Minnesota noncompete FAQ covers the basic enforceability questions from both sides.

How does the 2023 noncompete ban apply when the job changes?

The ban turns on the date the agreement was entered into, not the date the job changed. Under Minn. Stat. § 181.988, subd. 2, “Any covenant not to compete contained in a contract or agreement is void and unenforceable,” and the enacting session law says the section “applies to contracts and agreements entered into on or after” July 1, 2023 (2023 Minn. Laws ch. 53, art. 6, § 1).

That date rule produces two results for a job change:

1. A noncompete signed before July 1, 2023 stays under the older case law. A promotion or reassignment after that date does not, by itself, bring the old covenant under the statute. My page on how the ban affects pre-2023 agreements covers that group.
2. A new noncompete signed at the change is void. The only exceptions are a covenant “agreed upon during the sale of a business” and one “agreed upon in anticipation of the dissolution of a business.” A promotion is neither.

The statute reaches independent contractors too: subdivision 1 defines “employee” as “any individual who performs services for an employer, including independent contractors.” Under subdivision 2(d), “a court may award an employee who is enforcing rights under this section reasonable attorney fees.”

Subdivision 3 adds a choice-of-law rule. An employer “must not require an employee who primarily resides and works in Minnesota, as a condition of employment,” to agree to a clause that would “deprive the employee of the substantive protection of Minnesota law with respect to a controversy arising in Minnesota,” and the subdivision “applies only to claims arising under this section.”

Why can a promotion make an old noncompete enforceable?

A promotion matters most when the noncompete was signed after the employee accepted the job, so that it was not part of the original hiring deal. Minnesota requires independent consideration for such a covenant, and a real advancement given in exchange for signing can supply it.

The Minnesota Supreme Court set the rule in National Recruiters, Inc. v. Cashman, 323 N.W.2d 736 (Minn. 1982). The recruiters there had agreed to their pay and duties before being handed a noncompete in their first days on the job. The court said “An addition to that agreement would require independent consideration” and held the covenants invalid.

The same court found consideration in Davies & Davies Agency, Inc. v. Davies, 298 N.W.2d 127 (Minn. 1980). The employee signed four months after hire and later “advanced to a selling position within the agency which would not have been open to him if he had not signed the contract.” His brother, who refused to sign, stayed in a largely clerical job. The court said “The adequacy of consideration for a noncompetition contract or clause in an ongoing employment relationship should depend on the facts of each case.”

The link between the benefit and the signature is what counts. In Sanborn Manufacturing Co. v. Currie, 500 N.W.2d 161 (Minn. App. 1993), the agreement listed “employment, continued employment, promotion, increase in compensation” as consideration, and the employee did receive raises and supervisory duties. The employee had accepted the offer before he was asked to sign, and the court said “Currie and Sanborn had an oral employment agreement before they executed the noncompetition agreement, and thus independent consideration for the noncompetition agreement was required.” The Court of Appeals reversed an injunction, because “there was no evidence suggesting that Currie’s raises were tied to the noncompetition agreement.” Saying the word “promotion” in the agreement did not supply one.

One way employers handled this was to pair each step up with a new signed rider. In Kallok v. Medtronic, Inc., 573 N.W.2d 356 (Minn. 1998), the employee joined a management incentive plan that gave him “new responsibilities, access to additional confidential information, and new benefits,” and “In consideration for the additional benefits” he signed a series of riders. The Supreme Court decided a claim against his new employer for interfering with those agreements; the injunction against him had been affirmed below. Since July 1, 2023, a new rider containing a noncompete would be void under § 181.988, so this pattern now applies only to agreements already signed.

What counts as a new noncompete agreement when the job changes?

When an employer hands an existing employee a revised contract that adds a noncompete, Minnesota treats the revision as its own noncompete agreement. It needs its own consideration, and since July 1, 2023 its date also brings it under the ban.

The rule comes from Freeman v. Duluth Clinic, Ltd., 334 N.W.2d 626 (Minn. 1983). A neurosurgeon who had become head of his department signed a new contract that matched his old one except for an added noncompete. The court said “Parties may by mutual consent modify existing employment contracts without consideration,” but “Where the modification adds a covenant not to compete, however, we will view the substituted contract as a separate noncompete agreement of the parties.” Because he received no added pay, benefits, or authority for signing, and nonsigners were treated the same, the covenant was unenforceable. Two justices dissented.

Two practical points follow for a job change today:

1. An added noncompete is a separate agreement. If the new offer letter or employment agreement for the promoted role adds a noncompete, Freeman treats it as a separate agreement, and a separate agreement signed on or after July 1, 2023 falls under the ban.
2. Read what the new paperwork says about the old agreement. I suggest checking whether the new document says it replaces all earlier agreements, because that language raises the question of whether the pre-2023 covenant still exists at all.

How do courts weigh a changed role in judging a noncompete’s reasonableness?

Minnesota courts measure a noncompete against the job the employee actually performed. A covenant written for a role with customer contact and inside information is easier to defend than the same covenant applied to someone moved away from those things.

Bennett is the clearest Minnesota example of a downward change. The radio announcer’s program format “was materially changed.” Near the end of his contract, the station moved him to “an inferior position, that of taping an all-night program which did not carry advertising,” and then offered renewal at union wages. Those findings came from a separate suit, decided first, in which the station sought an injunction against the announcer and lost. In the announcer’s own suit against the station for threatening the new employer, the Supreme Court observed that the station, the defendant there, “did not wish to continue plaintiff in the capacity for which he was hired.” It reversed summary judgment for the station, holding that “there are important fact questions which should be answered” first.

The same reasoning cuts the other way when the employee never built the relationships a covenant protects. In Klick v. Crosstown State Bank of Ham Lake, Inc., 372 N.W.2d 85 (Minn. App. 1985), a bank vice president had worked only months. The Court of Appeals pointed out that the “evidence clearly showed that respondent did not develop any special relationships with bank customers,” so a three-year limit could not be justified. In Davies, by contrast, the employee had grown into running the agency’s bond business and was often the only contact with those customers, which gave the agency a protectable interest in its client relationships.

The Supreme Court restated the overall standard in Kallok: noncompetes “are enforceable if they serve a legitimate employer interest and are not broader than necessary to protect this interest.” My page on an employer’s rights when an employee leaves to compete covers what to do once the employee has given notice.

When will a court narrow an old noncompete to fit the employee’s current job?

A Minnesota court may equitably modify an overbroad pre-2023 noncompete and enforce it only as far as it is reasonable, but it does not have to. That discretion matters after a job change, because a covenant written for the old role may be too broad for the new one.

In Davies, the trial court cut a five-year, 50-mile ban on the insurance business down to one year and bond sales in one county, matching the work the employee had actually done. The Supreme Court approved. It narrowed the ban further, to active solicitation of the agency’s clients. Footnote 1 explains that “in employment cases, a court should be permitted to make changes such as those made by the trial court in this case rather than be compelled to strike down the entire agreement as unreasonable.”

Klick shows the limit. The bank asked the court to narrow its covenant instead of voiding it, and the Court of Appeals said “no cases say that a court must do so.” The trial court’s refusal stood, in part because the employee received no special training and gained no special connections in his eight months.

Modification also cannot rescue a covenant the statute voids. For an agreement entered into on or after July 1, 2023, § 181.988, subd. 2 makes the covenant “void and unenforceable,” so there is nothing left to narrow. I suggest drafting any surviving pre-2023 style restriction, and any nonsolicitation clause, to the employee’s real role from the start, because a court that declines to rewrite it will simply refuse to enforce it. My page on drafting restrictive covenants that hold up walks through the scope terms.

What should a promoted employee sign instead of a new noncompete?

For a promoted employee, the useful agreements now are nondisclosure and nonsolicitation agreements, which § 181.988 excludes from the ban. Subdivision 1 provides that a covenant not to compete “does not include a nondisclosure agreement, or agreement designed to protect trade secrets or confidential information,” and “does not include a nonsolicitation agreement, or agreement restricting the ability to use client or contact lists, or solicit customers of the employer.” Federal law adds a content requirement for the nondisclosure agreement: “An employer shall provide notice of the immunity set forth in this subsection in any contract or agreement with an employee that governs the use of a trade secret or other confidential information,” and without that notice “the employer may not be awarded exemplary damages or attorney fees” under the federal trade secret statute “in an action against an employee to whom notice was not provided.” 18 U.S.C. § 1833(b)(3).

The promotion is the right moment to sign them, for two reasons:

• The promotion can serve as the exchange. The consideration cases above involved noncompetes; my page on consideration for a mid-employment nonsolicitation agreement covers whether the same rule reaches a nonsolicitation agreement. I suggest stating in the document that the new title, pay, or access is given in exchange for signing, because Sanborn shows that a benefit the employee would have received anyway may not count.
• A void clause does not sink the rest. Subdivision 2 provides that “Nothing in this subdivision shall be construed to render void or unenforceable any other provisions in a contract or agreement containing a void or unenforceable covenant not to compete.” If an old template still carries a noncompete, I suggest taking it out before the next signing. In a new agreement the clause protects nothing, while the confidentiality and nonsolicitation terms keep working either way.

Before you rely on an old noncompete after a role change, I suggest pulling the file and confirming five things:

1. The date the covenant was signed, and whether it was part of the original offer or presented after the employee accepted the job.
2. What the employee received at signing, and whether any later promotion was tied to signing.
3. How the employee’s customer contact and access to confidential information changed after signing.
4. Whether any later offer letter or agreement says it replaces earlier agreements.
5. Where the employee primarily resides and works.

My pages on non-compete alternatives for Minnesota employers and on what still protects a business after the ban cover the drafting of each alternative.

What Should You Do When an Employee’s Role Changes?

A material change in an employee’s job does not cancel a Minnesota noncompete by itself. For a covenant signed before July 1, 2023, the questions are consideration and fit: whether the employee received something real for signing, and whether the restriction still matches the job. For anything signed since, a new noncompete is void, so the promotion paperwork should carry a nondisclosure and nonsolicitation agreement tied to the new role instead. I can analyze whether an existing noncompete still holds after a role change, or prepare the agreements for a promotion. To start, email [email protected] with a brief description. I run a conflict check before analyzing confidential documents, so I suggest waiting to send the agreements until that check is done. More on the employer side of these agreements is in my Minnesota employment law materials.