When a partnership forms, expands or changes, the partners must legally define many aspects of their relationships, including employment and post-employment rights. To do so successfully, it is important to analyze the topics from two points of view: that of the employer and that of the employee, because a partner is both.
For example, stringent post-employment constraints may seem like a good idea from the employer point of view, but if one day you are the departing partner, what restraints would you think are fair and necessary? What can you reasonably enforce?
Also, the partner as employer may like an at-will employment clause, but does he or she want to be subject to such minimal employment rights? It could happen. And how does such a clause square with partnership rights and expectations under Minnesota statutes and common law?
And, what about buy-out rights and procedures? Many a costly partnership battle stems from vague or inequitable buy-out agreements and many a partnership has been damaged or disbanded by too generous and too immediate buy-out provisions. Under Minnesota law, the court will generally base buy-out processes and procedures upon the parties’ written agreement – you sign it, you live with it.
Takeaway: In drafting or updating a partnership agreement, the partners should be of two minds – employer and employee. Legal counsel will be important in helping strike the “good for the goose/good for the gander” balance and create a fair, workable, and enforceable partnership agreement.