Minnesota Governor Signs Law Banning Most Employment Non-Compete Agreements

As anticipated, Minnesota Gov. Tim Walz signed a bill May 24 banning non-compete agreements in the state as part of an omnibus jobs bill.

For your convenience, we have outlined some of the key points below:

1. What agreements will the non-compete ban apply to?

The ban applies to employment and certain independent contractor agreements entered into on or after July 1, 2023, and will prohibit agreements that restrict such employees or independent contractors post-termination from:

• doing work for another employer for a specified period of time,
• working in a specified geographical area, or
• working for another employer in a capacity that is similar to their current position.

The new law has a specific definition of the type of independent contractor covered, focusing on individuals who work pursuant to a contract in their individual name or the name of an entity formed by them, and payment for their services is not reported to the Internal Revenue Service on a W-2 form.

The law also prohibits employers from including provisions that condition employment on the employee agreeing to a venue or to arbitration outside of the state of Minnesota if the employee primarily resides and works in Minnesota.

2. What agreements will still be enforceable?

Restrictive agreements that will still be valid include:

• those entered into in connection with the sale or dissolution of a business and agreed to by all owners,
• nondisclosure agreements and agreements designed to protect trade secrets or confidential information, and
• non-solicitation agreements and agreements restricting the use of client lists.

3. What are employee remedies under the new law?

Contractual provisions that violate the statute are voidable by the employee at any time, and an employee enforcing rights under the statute may be awarded attorneys’ fees.

4. What can you do to prepare now?

Review your standard employment and/or restrictive covenant agreements and revise them as may be necessary to ensure you are protecting your business while complying with the new law.

We Can Help

If you have questions about how to protect your company’s legitimate business interests in the midst of this changing regulatory landscape, please contact one of the Maslon attorneys listed below.