A non-compete agreement in North Dakota includes limitations and protections everyone should know before signing a non-compete. Generally, North Dakota laws prohibit sellers of companies from being employed in the same industry or from opening a business in the same industry.
Sometimes, a non-solicitation agreement may be used with a non-compete agreement to avoid legal ambiguity and possible future litigation. This type of agreement restricts an entity’s ability to seek business from the employer’s customers and/or clients. North Dakota is not particularly open to non-compete agreements.
Is a Non-Compete Legally Enforceable in North Dakota?
For the most part, no. A non-compete’s enforceability is extremely limited to specific circumstances. The North Dakota Century Code, Chapter 9-08, states that all non-competes are voided if they are not explicitly associated with a company’s dissolution or the sale of a business. [1] In other words, North Dakota non-compete agreements are not legally enforceable if they are standard employment agreements signed by an employee and their employer.
What’s Protected?
North Dakota non-compete agreements protect one thing—an employer’s trade secrets. The Trade Secrets Act (Chapter 47-25.1) protects employers from having company trade secrets stolen or otherwise misappropriated. [2]
Employees who signed non-competes are protected from employers attempting to use another state’s non-compete laws to validate the non-compete. In Osborne v. Brown & Sawnger, Inc., the court determined employers are forbidden to rely on another state’s governing statutes regarding non-compete agreements to bypass North Dakota laws. [3]
Reasonable Use and Exemptions
Modifying North Dakota’s laws on non-compete agreements in 2019 adjusted language within the statute that limits non-competes to reasonable time restrictions and geolocations. [4] Currently, no court cases have contested this law, which makes the definition of the word “reasonable” legally ambiguous. In most states, reasonableness is determined by weighing the interests of the employer, employee, and general public.
- Enforceable when terminated without cause? Unsure
- Employee non-solicitation agreement permitted? Yes
- Customer non-solicitation agreements permitted? No
- Does continuing employment equal sufficient consideration? No
Exceptions included in House Bill 1351 do not change North Dakota’s prohibition against contracts containing non-compete agreements. [5]
Non-Compete Agreement North Dakota Limitations
Time Limitations
In North Dakota, the duration of your non-compete must be reasonable, given the circumstances. Generally, this means that the agreement is limited to only what is necessary to protect a legitimate business interest while not unfairly restricting the employee.
Geographical Limitations
Geographical limitations were previously confined to a city or county. However, the state’s Supreme Court has yet to determine what should be legally defined as an appropriately reasonable (limited) geographic area. North Dakota’s Century Code asserts that non-competes must be relegated to limited geolocations in which the company involved operates and completes transactions.
North Dakota Non-Compete Agreement Sample
Here is a sample of a North Dakota non-compete agreement:
