CONTRACTS & SEVERANCE

What kind of employment agreements are there in Minnesota?

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Employment agreements, such as employment contracts and severance agreements, are agreements between an employer and an employee that outline terms and conditions related to the employment. These are often in document form and are important because they establish the rights and obligations of each party during and, in some cases, after the employment relationship. Employment agreements can be in combined or may be in the form of several individual agreements. Examples include:  

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Contract for Employment: An employment contract is a legal agreement between an employer and an employee that defines the terms of employment. It can include details such as:

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• Job title and responsibilities.

• Compensation and benefits.

• Duration of employment.

• Grounds for termination

• Dispute resolution procedures. 

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Confidentiality/Non-Disclosure Agreement: A confidentiality agreement, also known as a non-disclosure agreement (NDA), is a legal contract that outlines how sensitive information should be handled between parties. In the context of employment, it's often used to ensure that employees or contractors do not disclose a company's trade secrets, proprietary information, or other confidential business information during or after their employment. A confidentiality agreement typically includes:

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• Definition of what information is confidential: This can range from client lists, business strategies, proprietary technology, product specifications, to other sensitive information.

• Obligations of the receiving party: This generally includes not disclosing the confidential information to others and not using the confidential information for their benefit.

• Time period: Confidentiality agreements can remain in effect for a certain period of time after the end of the employment relationship.

• Consequences of breach: This typically includes potential legal remedies such as damages, injunctions, and, in some cases, criminal charges.

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Non-Compete Agreement: A non-compete agreement is a contract between an employer and an employee in which the employee agrees not to enter into competition with the employer during or after employment. In Minnesota, the use of non-compete agreements will be almost entirely banned as of July 1, 2023.

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Severance Agreement: A severance agreement is a contract that outlines the terms and conditions of an employee's termination. This type of agreement is typically used when an employee is being laid off or is leaving the company in circumstances other than a straightforward resignation or retirement. A severance agreement usually includes details about any severance pay, the continuation of benefits, the return of company property, and, frequently, a release of claims against the employer where the employee agrees not to sue the employer for wrongful termination or related legal claims. Here are some common elements that may be included in a severance agreement:

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• Severance Pay: This is often the main component of a severance agreement. The amount of severance pay can vary widely, but it is often based on the employee's length of service with the company. It's essentially compensation that the employee receives in exchange for losing their job.

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• Continuation of Benefits: The severance agreement may specify that certain benefits, such as health insurance, will continue for a certain period after termination, often in accordance with the federal law known as COBRA.

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• Release of Claims: In many cases, a severance agreement will include a release or waiver by which the employee agrees not to sue the employer for wrongful termination or related legal claims. In exchange for this waiver, the employer provides something of value beyond what the employee is already entitled to, often in the form of additional compensation or benefits.

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• Non-Compete and Non-Disclosure Clauses: Some severance agreements include non-compete clauses, which prevent the employee from working for a competitor for a certain period. Non-disclosure or confidentiality clauses may also be included, prohibiting the employee from disclosing proprietary company information. 

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• References and Unemployment Compensation: The agreement might include provisions about how references will be handled or could contain an agreement by the employer not to contest a claim for unemployment compensation.

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Severance agreements can be complex, and the stakes are often high for both the employer and the employee. It's advisable for both parties to consult with an employment law attorney before finalizing a severance agreement. For employees, it's important to fully understand the rights you're giving up in exchange for the severance package. For employers, it's crucial to ensure the agreement is legally sound and does not expose you to future liability.

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Settlement Agreement: A settlement agreement is a contract that resolves a dispute between two or more parties. In the context of employment law, a settlement agreement often serves to resolve a dispute between an employer and an employee or a group of employees. Settlement agreements can be used in a variety of circumstances, such as resolving:

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• Claims of discrimination or harassment

• Wage and hour disputes

• Wrongful termination claims

• Disputes over non-compete clauses or trade secrets

• Other employment-related disputes

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Settlement Agreements often have similar elements common to severance agreements. While severance agreements and settlement agreements can both involve payments from the employer to the employee and a release of claims, they are used in different contexts. A severance agreement is typically offered when an employee is laid off or otherwise leaves the company, often regardless of whether there is a dispute. A settlement agreement, on the other hand, is used to resolve an existing dispute. 

 

Both types of agreements can have significant legal implications, so it's advisable for both parties to consult with an attorney before entering into such an agreement.

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Are Non-Compete Agreements Legal in Minnesota?

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In Minnesota, the use of non-compete agreements will be almost entirely banned as of July 1, 2023.