Careful Drafting of Non-Compete Covenants: Words Have Meaning

Last week I received a call from a client.  The subject of the call was something I had dealt with many times:  the client wished to hire someone who was bound by a non-compete agreement and the client was asking me as to whether it was enforceable.

Non-compete covenants are tricky things.  Courts do not like them as they place restrictions on the general rule of “at-will” employment (that is, the employer can fire the employee at any time for any reason or no reason and the employee can quit at any time for any reason or no reason).  As a result, non-compete covenants are viewed narrowly and the courts balance the interests of employer and employee.  Issues such as the duration of the non-compete as well as its geographic scope are frequently litigated. 

This covenant was a bit unique in regards to the geographic restriction.  Instead of referencing a radius around the current employer’s business (which is extremely common in non-compete covenants), this document referenced “driving distance”.  The client called because, predictably, even though its office was within a radius of X miles from the current employer, the covenant called out a driving distance of X miles.  Using Google Maps and Mapquest, my client found that the driving distance was greater than X miles. 

In reviewing Minnesota law, I was pleasantly surprised to find a 2001 unpublished Minnesota Court of Appeals case, Tom Schmidt Associates, Inc. v. Autumn Williams, et al, that addressed this very issue.  The former employer sought to prevent the former employee from working within a 5 mile radius of its business, and the covenant referenced “driving distance”.  The Court found that “driving distance” is not synonymous with “radius” and found for the former employee.

In other words, if the former employer meant to say radius, it should have said “radius” instead of “driving distance.”  Words have meaning, though, so in the Tom Schmidt Associates, Inc. case, the employer lost.