HRM 7600 Module 2 HR Decisions in the Legal Environment Example

Nine Technicians Gone: Should a Two-State Contractor Use Noncompetes?

Student Name

Master of Business Administration, Thomas Edison State University

HRM-7600: Human Resource Management - Talent Management

Mentor Name

Month Day, Year

Nine Technicians Gone: Should a Two-State Contractor Use Noncompetes?

DeNisi and Griffin (2020) present HR decisions as choices made within an environment of laws, economic conditions and organizational goals. A sound decision defines the problem, identifies options, gathers evidence and weighs legal limits alongside costs and benefits. This paper applies that approach to North Star Comfort, a composite HVAC installer and service company with 240 field technicians in the Minneapolis and Eau Claire areas. Last year nine experienced technicians left for a competitor, and two took customer service contracts with them. The owners have asked whether every technician should sign a noncompete agreement.

Defining the Problem

The owners' instinct is to prevent departures, but the real problems are narrower. The firm loses money when departing technicians take customers, and it loses capability when experienced people leave faster than it can train replacements. A noncompete addresses both only indirectly, by making it harder to leave, and it may create new problems in recruiting and morale. Framing the decision as protecting customer relationships and keeping skilled technicians opens a wider set of options.

The Legal Environment

The law differs across the firm's two states and has shifted nationally. Minnesota prohibits noncompete agreements with employees and independent contractors entered into on or after July 1, 2023, with narrow exceptions such as the sale of a business (Minn. Stat. § 181.988, 2025). Any noncompete for the firm's Minnesota technicians would therefore be void. Wisconsin permits noncompetes only if the restriction is reasonably necessary to protect the employer and reasonable in time and territory, and its courts will strike an unreasonable covenant entirely rather than rewrite it (Wis. Stat. § 103.465, 2025).

At the federal level, the Federal Trade Commission issued a rule in 2024 that would have banned most noncompetes nationwide (Federal Trade Commission, 2024). A federal district court set the rule aside before it took effect, and in September 2025 the Commission voted to dismiss its appeals and accept that outcome (Federal Trade Commission, 2025). The agency has said it will continue to challenge particular noncompetes case by case. For an employer, the practical conclusion is that federal law no longer bans noncompetes outright, but state law and enforcement risk still matter.

The Economic Environment and the Evidence

Skilled trades are in short supply, so technicians have many choices. A noncompete that makes a job less attractive may cost the firm more in recruiting than it saves in retention. Starr et al. (2021), surveying more than 11,000 workers, estimated that about 18 percent of U.S. labor force participants were bound by a noncompete and that about 38 percent had agreed to one at some point. They also found that noncompetes were often used with workers who had no access to trade secrets, and that many employees did not read or negotiate them, which raises questions of fairness and enforceability.

The Options

Four options deserve comparison.

Customer nonsolicitation agreements bar departing employees from soliciting the firm's customers for a set period without stopping them from working in the trade; they are not noncompetes under the Minnesota statute, although they must still be reasonable. A retention bonus of $1,500 paid on each of the second, third and fourth anniversaries, combined with a three-step technician ladder with pay steps for certifications, would cost about $180,000 a year at current headcount.

Recommendation

North Star should not adopt noncompetes. It should require confidentiality and twelve-month customer nonsolicitation agreements from technicians and service managers in both states, drafted by counsel to fit each state's law, and launch the retention bonus and career ladder. The nine departures cost the firm two service contracts and roughly $230,000 in recruiting and training replacements, so the retention program would pay for itself if it prevented most of a year's departures. The trade-off is that the firm gives up a tool that might have deterred a few Wisconsin departures and accepts that technicians remain free to work for competitors. It gains a policy that is enforceable, fair and helpful in recruiting.

Measures

The owners should track voluntary turnover among technicians with more than two years of service, the number of customer contracts lost after departures and acceptance rates on job offers. If experienced turnover does not fall by a third within eighteen months, the bonus amounts or ladder steps should be revisited.

Conclusion

Following the decision process in the course text (DeNisi & Griffin, 2020) changes the question from how to stop people from leaving to how to protect customers and keep skills. In an environment where one state bans noncompetes, the other limits them and federal policy has shifted twice in two years, the stronger choice is a combination of narrow legal protections and positive reasons to stay.

References

DeNisi, A. S., & Griffin, R. W. (2020). HR (5th ed.). Cengage Learning.

Federal Trade Commission. (2024). Non-compete clause rule. Federal Register, 89, 38342.

Federal Trade Commission. (2025, September 5). Federal Trade Commission files to accede to vacatur of Non-Compete Clause Rule [Press release].

Minn. Stat. § 181.988 (2025). Covenants not to compete void in employment agreements.

Starr, E. P., Prescott, J. J., & Bishara, N. D. (2021). Noncompete agreements in the US labor force. Journal of Law and Economics, 64(1), 53-84. https://doi.org/10.1086/712206

Wis. Stat. § 103.465 (2025). Restrictive covenants in employment contracts.