Private Agreements Do Not Rule When It Comes To Enforcing Remedy Provisions Of Non-Competes

The interplay between two well-recognized legal principles came into sharp focus in a case recently decided by the Minnesota Supreme Court. The right of private individuals and businesses to agree upon a particular remedy for a contract breach was juxtaposed against a court’s discretion to grant or deny an equitable remedy. The court’s discretion won out. The case, St. Jude Medical, Inc. v. Heath Carter, 913 N.W.2d 678 (Minn. 2018), warrants the attention of every attorney drafting non-compete agreements in Minnesota.
Most employers include a detailed remedy provision in non-compete agreements they ask employees to sign. And for good reason. Employees are then informed from the outset of potential consequences if they breach. The remedy provision typically includes statements that the employee recognizes the harm the employer will incur in the event of a breach. These statements became the focus of the dispute between St. Jude and Heath Carter.
As part of his employment with St. Jude, Carter signed an employment agreement that included a non-disclosure covenant, a non-competition covenant and a remedies provision. The remedies provision provided: “In the event [Carter] breaches the covenants contained in this Agreement, [he] recognizes that irreparable injury will result to SJM [St. Jude], that SJM’s remedy at law for damages will be inadequate, and that SJM shall be entitled to an injunction to restrain the continuing breach by [Carter].” All fine and good to have an employee sign off on these prospective statements. But what if, in fact, a breach by an employee of a non-competition agreement does not cause irreparable injury to the employer. That is what happened for St. Jude when Carter left to join a competitor, Boston Science.