Non-Compete Agreements have always been disfavored in the eyes of the law. Now they are banned in Minnesota. Here is what you need to know:
What is a Non-Compete Agreement?
A Non-Compete Agreement is any agreement that prevents an employee from obtaining certain employment following termination. It includes prohibitions on working in a particular capacity or for particular employers/competitors in a specified geographic region and/or for a specified amount of time.
Did Minnesota Ban Non-Compete Agreements?
Yes. Employers may no longer enter into Non-Compete Agreements with their employees or independent contractors.
When does the ban take effect?
The new law is effective July 1, 2023, and applies to Non-Compete Agreements entered into on or after that date.
Are there any exceptions to this ban?
Yes. A Non-Compete Agreement can still be made in connection with the sale of a business or in anticipation of the dissolution of a business.
Can an employer get around this ban by using different state law?
No. For employees who primarily reside and work in Minnesota, an employer may not offer a Non-Compete Agreement that purports to be governed by different state law and may not require the employee to adjudicate claims outside of Minnesota.
What if I already have a Non-Compete Agreement—is it still enforceable?
The new law only applies to Non-Compete Agreements entered into on or after July 1, 2023. The new law does not rescind contracts entered into before July 1, 2023.
What about other Restrictive Covenants—are they still enforceable?
Yes. Employers may still offer and enforce other restrictive covenants, including:
- Nondisclosure Agreements
- Agreements designed to protect trade secrets
- Non-Solicitation Agreements governing non-solicitation of other employees of the company
- Non-Solicitation Agreements governing non-solicitation of customers or clients of the company
- Confidentiality Agreements, including prohibitions on using client or contact lists
What happens if I am offered a Non-Compete Agreement or if I sign one despite the ban?
Any Non-Compete Agreement entered into on or after July 1, 2023, is void and unenforceable. Employees may obtain injunctive relief and may be awarded reasonable attorney fees for enforcing their rights under the new law.
Note, however, that if an employment contract contains a Non-Compete Agreement and other types of agreements or clauses (such as those listed above), the new law only renders the Non-Compete portion of the contract void and unenforceable—it does not void the entire contract.