Tortious Interference With Employment in Minnesota

What is tortious interference with an employment relationship in Minnesota?

It is a claim against an outsider who wrongly causes a breach of someone else’s employment contract, including an at-will one. When an outsider’s interference with your staff causes an employee to break a job contract, this is the claim your business brings against that outsider. The Minnesota Supreme Court held in 1991 that “a tortious interference claim will lie for an at-will employment agreement,” because “The at-will employment subsists at the will of the employer and employee, not at the will of a third party meddler who wrongfully interferes with the contractual relations of others.” Nordling v. Northern States Power Co., 478 N.W.2d 498 (Minn. 1991).

Three points follow for an employer:

1. The claim runs against outsiders, not the employer. “The general rule is that a party cannot interfere with its own contract.” The employee’s dispute with the employer is a contract claim, not an interference claim (Nordling).
2. At-will status bears on the damages, not the claim. Nordling quoted the Restatement comment that “The fact that the contract is terminable at will, however, is to be taken into account in determining the damages that the plaintiff has suffered by reason of its breach.”
3. Handbook terms can become the contract. Nordling recited that “The trial court has ruled there is a jury issue whether Nordling had a contractual right not to be discharged without compliance with the progressive disciplinary steps of the employee handbook,” and then proceeded “Assuming a contractual breach might be established,” so written discipline procedures can shape what counts as a breach.

The broader tort, which also covers customer and vendor contracts, is on the page about tortious interference claims in Minnesota.

What must be proved to win an employment interference claim?

The party claiming interference must prove five elements: “(1) the existence of a contract; (2) the alleged wrongdoer’s knowledge of the contract; (3) intentional procurement of its breach; (4) without justification; and (5) damages.” Kjesbo v. Ricks, 517 N.W.2d 585 (Minn. 1994). The accused business carries the burden on justification.

Each element has a feature that matters in hiring disputes:

1. Knowledge includes what you should have asked about. “It is enough if the defendant had knowledge of facts which, if followed by reasonable inquiry, would have led to complete disclosure of the contractual relations and rights of the parties” (Kjesbo, footnote 3). Ignoring a likely noncompete does not avoid this element.
2. Justification is judged on reasonableness. “Ordinarily, whether interference is justified is an issue of fact, and the test is what is reasonable conduct under the circumstances,” and “The burden of proving justification is on the defendants” (Kjesbo).
3. No breach, no claim. In Bebo v. Delander, 632 N.W.2d 732 (Minn. Ct. App. 2001), the court affirmed dismissal because the employer did not breach the at-will agreement. The court held that a district court does not err in ending an interference claim when the plaintiff has not shown a breach of contract.

The elements say nothing about malice. A bad motive matters as evidence on justification and, for a co-worker, as the way a privilege is lost (covered below).

How does hiring a competitor’s employee lead to an interference claim?

A business that knowingly hires a competitor’s employee into work a valid noncompete forbids can owe the former employer damages, including the legal fees the former employer spent enforcing the noncompete against the employee. That is the holding of Kallok v. Medtronic, Inc., 573 N.W.2d 356 (Minn. 1998), decided on agreements signed long before Minnesota’s 2023 noncompete ban.

The court stated the rule this way: “Accordingly, we hold that if a noncompete agreement is deemed valid and if the elements of tortious interference are established, interference with the noncompete agreement by a third party is a tort for which damages are recoverable.” The facts that satisfied each element were ordinary hiring steps:

1. Knowledge. The scientist told the hiring company’s chief executive that he might be bound, and the executive, a former employee of the same company, “assumed that Kallok was subject to similar agreements.”
2. Procurement. The hiring company’s officials “met with Kallok on numerous occasions and procured the breach of his noncompete agreements by offering him the vice president position that he eventually accepted.”
3. No justification. The court held that the hiring company “did not utilize a reasonable inquiry” into whether the agreements barred the job.

The damages came from the former employer’s lawsuit against its own scientist. Under “the third-party litigation exception to the American rule,” a court may “award attorney fees as damages if the defendant’s tortious act thrusts or projects the plaintiff into litigation with a third party.” The district court had measured the damages that way, and the Minnesota Supreme Court held that the award “was proper.”

How does advice of counsel justify a hire?

Advice from your lawyer that a candidate’s noncompete is unenforceable can justify the hire, even if the advice proves wrong, but only when your inquiry was reasonable and your reliance honest. In Sysdyne Corp. v. Rousslang, 860 N.W.2d 347 (Minn. 2015), the Minnesota Supreme Court held that “the justification defense to tortious interference with contract may encompass reasonable reliance on advice of counsel.”

The two decisions show what separates a defense that works from one that fails:

1. The inquiry that failed. In Kallok, the hiring company did not fully inform its outside counsel about the scientist’s background or the details of his agreements. The court held it “may not rely upon an infirm consultation with counsel and the resulting advice as a justification for its action.” Sysdyne later noted that the Kallok company “actually provided incorrect information” and did not give counsel copies of the agreements.
2. The inquiry that worked. In Sysdyne, the hiring company gave its lawyer the candidate’s employment agreement and original offer letter and said the candidate would do essentially the same work. It produced billing records and an e-mail exchange showing the review. The court held that “a defendant is not required to establish the legal analysis underlying an attorney’s advice in order to prove justification.”

Winning the interference claim did not end the cost. The former employer still won $158,240 against the employee for breach of contract. The court noted that the hiring company was ultimately responsible for that amount because it had agreed to cover the employee’s legal fees for the move. A promise to cover a recruit’s legal costs should be priced as a promise to cover the recruit’s liability, because that is how it worked in Sysdyne.

Sometimes the agreements are not what the former employer’s letter implies. In one matter I looked at, a former employer’s lawyers sent a demand letter to a worker who had left and a parallel letter to the competitor that hired the worker. The worker’s offer letter contained no noncompete, nonsolicitation, or confidentiality clause, so any interference claim against the new employer had to rest on some other contract or duty. Identifying that contract or duty was a core part of the analysis. The page on the legal risks of hiring from a competitor covers the rest of a hiring company’s exposure.

What damages and remedies are available for tortious interference with employment?

The winning party can recover the losses the breach caused and can ask the court to stop the interference. Kallok stated that once interference by a third party is established, courts may hold the third party liable for any resulting damages and may grant necessary injunctive relief. In Kallok itself, the district court barred the scientist from working for the hiring company for one year. It measured the employer’s damages by its legal fees and expenses in the suit against him, as described above.

What counts as a resulting loss depends on who sues and what the breach cost:

1. A worker who lost a job. The claim is for what the breach of the job contract cost the worker, such as lost pay. As Nordling noted, at-will status is taken into account in measuring those damages; it does not bar the claim.
2. An employer that lost an employee or business. Lost profits must be proved with evidence; a projection of business from unidentified customers is not enough. Gieseke v. IDCA, Inc., 844 N.W.2d 210 (Minn. 2014), involved interference with prospective business rather than an existing contract. An advisory jury found $220,000 in damages, the district court adopted that finding, and the award rested on testimony about lost profits. The Minnesota Supreme Court vacated the judgment on that claim because the company had not identified the third parties it expected to do business with or proved damages caused by the interference. The court stated that “Diversified’s alleged damages are speculative,” noting that it claimed lost future work from existing customers but “did not identify any of those customers.”

Punitive damages are available only on the showing that Minn. Stat. § 549.20, subd. 1(a), requires: “Punitive damages shall be allowed in civil actions only upon clear and convincing evidence that the acts of the defendant show deliberate disregard for the rights or safety of others.” Three more rules shape the request:

1. No punitive claim in the complaint. Under Minn. Stat. § 549.191, “Upon commencement of a civil action, the complaint must not seek punitive damages.” A party must later move to amend, with affidavits, and the court grants the motion only “if the court finds prima facie evidence in support of the motion.”
2. What deliberate disregard means. Under subd. 1(b), the defendant must have “knowledge of facts or intentionally disregards facts that create a high probability of injury to the rights or safety of others” and then deliberately proceed in “conscious or intentional disregard” of, or “with indifference to,” that probability.
3. A company pays for its manager’s conduct only in listed cases. Under subd. 2, punitive damages can be awarded against a principal for an agent’s act only if, among other grounds, “the principal authorized the doing and the manner of the act” or “the agent was employed in a managerial capacity with authority to establish policy and make planning level decisions for the principal and was acting in the scope of that employment.”

More on measuring these losses is on the page about damages for tortious interference.

How does Minnesota’s noncompete ban change interference claims?

For agreements entered into on or after July 1, 2023, an employee noncompete is “void and unenforceable” under Minn. Stat. § 181.988, subd. 2(a), so for an employee who primarily resides and works in Minnesota it cannot be the valid agreement Kallok requires. Two exceptions remain in subd. 2(b): a covenant “agreed upon during the sale of a business” and one “agreed upon in anticipation of the dissolution of a business.”

The timing comes from the enacting law, 2023 Minn. Laws ch. 53, art. 6, sec. 1: “This section is effective July 1, 2023, and applies to contracts and agreements entered into on or after that date.” A noncompete signed before that date is still judged under the earlier common-law test, which is explained on the page about noncompetes signed before the ban. Bebo described an earlier decision in which an interference claim failed because an unenforceable contract could not be breached.

The ban leaves other covenants in place. Under subd. 1, “A covenant not to compete does not include a nondisclosure agreement, or agreement designed to protect trade secrets or confidential information. A covenant not to compete does not include a nonsolicitation agreement, or agreement restricting the ability to use client or contact lists, or solicit customers of the employer.” The statute’s “Employee” also “means any individual who performs services for an employer, including independent contractors.” A recruit’s confidentiality and nonsolicitation promises therefore still matter to an interference analysis.

The ban’s choice-of-law protection has a defined reach. Under subd. 3, an employer “must not require an employee who primarily resides and works in Minnesota, as a condition of employment,” to agree to a provision that takes away Minnesota’s protection, and subd. 3(e) states “This subdivision applies only to claims arising under this section.” For a recruit who lives or works elsewhere, a valid choice-of-law clause may make another state’s noncompete law govern.

When can a manager be personally liable for interfering with an employee’s job?

A manager who acts in good faith for the company is privileged, even if the decision is a poor one. The privilege may be lost if the manager’s actions are predominantly motivated by malice and bad faith. Nordling held that “a company officer, agent or employee is privileged to interfere with or cause a breach of another employee’s employment contract with the company, if that person acts in good faith, whether competently or not, believing that his actions are in furtherance of the company’s business.”

The court then said how the privilege is lost: “This privilege may be lost, however, if the defendant’s actions are predominantly motivated by malice and bad faith, that is, by personal ill-will, spite, hostility, or a deliberate intent to harm the plaintiff employee.” It placed the burden on the employee: “The burden of proving actual malice is on the plaintiff.”

Nordling sent the claim against the supervising vice president back for trial on disputed facts about his motive. It affirmed dismissal of the claim against a co-worker because his conduct did not cause the discharge. The court did not decide whether a claim against a co-worker with no supervisory role over the employee could ever succeed. I suggest documenting a business-based reason for each discipline and termination decision, because motive becomes the fact question when a manager is sued.

What limits apply when a former employer contacts a former employee’s new employer?

A former employer may protect real contract rights, but Minnesota law limits how it speaks to a new employer. Interference with a prospective relationship must be independently wrongful, references have a statutory safe harbor with conditions, and blacklisting is a crime. Each rule applies separately.

1. Prospective relationships need an independent wrong. Gieseke governs interference with a relationship that is not yet a contract, such as a job offer still being negotiated. It requires proof that the defendant “intentionally interfered with plaintiffs reasonable expectation of economic advantage, and the intentional interference is either independently tortious or in violation of a state or federal statute or regulation.” The plaintiff “must specifically identify a third party with whom the plaintiff had a reasonable probability of a future economic relationship.” That case involved a business’s customers; the page on interference with prospective economic advantage covers the claim in full.
2. Blacklisting is a misdemeanor. I suggest that a letter to a new employer assert only the specific contract rights that exist, because Minn. Stat. § 179.60 reaches any word or writing that seeks to keep a former employee from working elsewhere. The statute makes it unlawful “to blacklist any discharged employee, or by word or writing seek to prevent, hinder, or restrain a discharged employee, or one who has voluntarily left its employ, from obtaining employment elsewhere,” and provides that a violator “shall be guilty of a misdemeanor.”
3. References have a conditional safe harbor. Under Minn. Stat. § 181.967, subd. 2, “No action may be maintained against an employer by an employee or former employee for the disclosure of information listed in subdivisions 3 to 5 about the employee to a prospective employer,” unless the employee proves by clear and convincing evidence that the information was false and defamatory and that the employer “knew or should have known the information was false and acted with malicious intent to injure the current or former employee” (subd. 2(2)). For a private employer, subd. 3 covers dates of employment, pay history, duties, training, and documented “acts of violence, theft, harassment, or illegal conduct” that led to discipline or resignation, with the employee’s written response, if any, disclosed “in response to a request” (subd. 3(a)). A disclosure of that misconduct (subd. 3(a)(5)) “must be in writing with a copy sent contemporaneously by regular mail to the employee’s last known address.” With the employee’s written authorization, subd. 3(b) extends the same protection to the written disclosure of “written employee evaluations conducted before the employee’s separation from the employer,” “written disciplinary warnings and actions in the five years before the date of the authorization,” and “written reasons for separation from employment.” Subd. 3(b) also provides: “The employer must contemporaneously provide the employee or former employee with a copy of information disclosed under this paragraph and to whom it was disclosed by mailing the information to the employee or former employee.” Under subd. 6(b), the section “does not apply to an action involving an alleged violation of chapter 363 or other statute.”

Before a letter goes out, how firmly to assert the agreements is a strategy choice; the page on cease-and-desist letters in poaching disputes covers it.

How do staffing and vendor contracts affect interference claims?

Under a contract entered into on or after July 1, 2024, a staffing company or other service provider cannot stop a customer from hiring its workers, apart from a software-consulting exemption quoted below. A customer’s request that a vendor move a worker to another account is not interference when the vendor has the right to reassign.

Minn. Stat. § 181.9881, subd. 2, provides: “(a) No service provider may restrict, restrain, or prohibit in any way a customer from directly or indirectly soliciting or hiring an employee of a service provider.” The enacting law, 2024 Minn. Laws ch. 110, art. 2, sec. 12, states “This section is effective July 1, 2024, and applies to contracts and agreements entered into on or after that date.” Under subd. 3, the section “does not apply to workers providing professional business consulting for computer software development and related services who are seeking employment through a service provider with the knowledge and intention of being considered for a permanent position of employment with the customer as their employer at a later date.” No-hire terms between two businesses outside that setting raise their own issues, covered on the page about no-poach agreements.

Bebo shows the reassignment rule. After disputes at a customer’s loading docks, the customer’s manager and the trucking company’s president agreed to keep a driver off the customer’s routes. The driver sued the customer and two of its shipping clerks for interference. The court held that “under the terms of appellant’s at-will employment agreement, K-Way president Koch and the dispatchers had the discretion to reassign appellant to different routes,” so there was no breach and no claim. The driver was reassigned, not suspended or fired; a request that leads a vendor to end a worker’s job entirely raises a different question that Bebo did not decide.

How do trade secret laws overlap with interference claims?

When a hire brings a former employer’s confidential information, the dispute can become a trade secret case under the Minnesota Uniform Trade Secrets Act (“MUTSA”) and the federal Defend Trade Secrets Act (“DTSA”). MUTSA can also displace an interference claim built only on misappropriation. A hiring company should treat a recruit’s secrecy duties as seriously as a noncompete, because inducing a breach of them is itself improper means under MUTSA.

1. Inducing a breach of secrecy is improper means. Under Minn. Stat. § 325C.01, subd. 2, improper means “includes theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means.”
2. MUTSA displaces overlapping tort claims. Minn. Stat. § 325C.07 provides that the act displaces “conflicting tort, restitutionary, and other law of this state providing civil remedies for misappropriation of a trade secret,” but it does not affect “other civil remedies that are not based upon misappropriation of a trade secret.” An interference claim over the breach of a nonsolicitation promise, for example, may fall outside the displacement when it does not rest on misappropriation.
3. DTSA injunctions cannot block the job itself. Under 18 U.S.C. § 1836(b)(3)(A)(i), in “a civil action brought under this subsection with respect to the misappropriation of a trade secret,” a court’s injunction may not “prevent a person from entering into an employment relationship, and that conditions placed on such employment shall be based on evidence of threatened misappropriation and not merely on the information the person knows,” or “otherwise conflict with an applicable State law prohibiting restraints on the practice of a lawful profession, trade, or business.” The federal claim is available when the trade secret relates to a product or service used in interstate or foreign commerce.

The state act’s elements and remedies are on the page about the Minnesota Uniform Trade Secrets Act.

How can a Minnesota employer prevent wrongful interference claims when hiring from a competitor?

I suggest building the hiring file before the offer, because the cases turn on what the hiring company knew, asked, and did. Each step below traces to a rule earlier on this page.

1. Every restrictive agreement, in writing. The file should hold the candidate’s signed agreements, offer letters, and any handbook acknowledgments, because Kjesbo charges you with what a reasonable inquiry would reveal.
2. The full picture for your lawyer. Your lawyer should receive the documents and an accurate description of the old and new jobs. Kallok rejected advice built on incomplete and incorrect facts, and Sysdyne accepted advice built on the agreement and a truthful job description.
3. A record of the review. The file should keep the e-mails and billing entries showing the consultation, because they were part of the evidence that carried the defense in Sysdyne.
4. The date and governing law of any noncompete. You should confirm whether it was entered into before July 1, 2023, or was part of a business sale or dissolution, because § 181.988 voids the rest. You should also confirm whether the recruit primarily resides and works in Minnesota, because subd. 3’s choice-of-law protection reaches only that employee.
5. Nonsolicitation and confidentiality promises. These should be treated as live, because the ban does not reach them under § 181.988, subd. 1, and inducing a breach of a secrecy duty is “improper means” under MUTSA.
6. Written instructions to the hire. The new employee should be told in writing not to bring or use the former employer’s confidential information and to honor valid customer and employee nonsolicitation terms. That instruction helps keep the company’s own conduct from becoming the procurement of a breach.
7. Your indemnity promises. A promise to cover a recruit’s legal costs should be read as a possible promise to pay a contract judgment, as the hiring company did in Sysdyne.

What should a Minnesota employer take from these rules?

Minnesota’s interference rules come from court decisions. An outsider who knowingly causes a breach of an employment contract without justification owes damages, an at-will job can support the claim, and a hiring company can defend with a reasonable, documented inquiry. The 2023 noncompete ban, the 2024 staffing statute, the reference and blacklisting statutes, and the trade secret acts change the answer in their own settings. You may be about to hire from a competitor, have received a letter about a recent hire, or be losing employees to a competitor. In each case, I can analyze the agreements and tell you what Minnesota contract law allows. Email aaron@aaronhall.com with a brief description and the agreements involved.