Minnesota Set to Invalidate All Future Non-Compete Agreements

 On May 24, 2023, Minnesota Governor Tim Walz signed into law a provision banning all future non-compete agreements in Minnesota.  The term “non-compete” is defined to include provisions restricting an employee (or independent contractor) from performing work for another employer for a specified period of time, in a specified geographical area, or in a capacity that is similar to the employee’s work for the employer.  The ban will be effective for all non-compete agreements (also known as a “covenant not to compete”) entered on or after July 1, 2023.

By enacting the Omnibus Jobs, Economic Development, Labor and Industry appropriations bill, Minnesota will become just the fourth state (joining California, Oklahoma and North Dakota) to ban non-compete agreements.  Although the new law bans the enforcement of all non-compete agreements entered into with employees or independent contractors, the law does allow covenants not to compete in connection with the sale or dissolution of a business.

It is also important to note that the law only renders void and unenforceable covenants not to compete; the balance of an otherwise enforceable contract or agreement is not affected.  This means that other types of restrictive covenants can still be enforced under Minnesota law, including non-disclosure agreements, agreements designed to protect trade secrets, agreements to protect confidential information, agreements restricting the ability to use client or contact lists, and non-solicitation agreements.

The newly passed legislation also prevents employers from seeking to circumvent the new law by prohibiting employers from requiring employees to agree to clauses designating choice of law and venue in any state other than Minnesota.  Employees seeking to enforce the non-compete ban will be allowed to recover reasonable attorneys’ fees.

The ban on non-compete agreements does not apply retroactively, meaning all existing non-compete agreements signed before the effective date will remain enforceable, as permitted under Minnesota law.  However, employers with employees or independent contractors in Minnesota should take action to ensure that their agreements are in compliance with the new law starting July 1.

Minnesota Paid Family and Medical Leave Law (starting in 2026) 

Paid Family and Medical Leave is a new program being launched in Minnesota in 2026.  It will provide for both paid family leave for an employee to care for a family member with a serious health condition, or for an employee to bond with a new baby or child in their family.  It will also provide for paid medical leave for an employee’s own serious health condition if it prevents the employee from working.  Additionally, Minnesota employees will be able to take leave to support a family member in the military deploying overseas, or if an employee or a family member is facing a significant personal safety issue.  The legislation breaks benefits into two categories: 1) medical leave, including for pregnancy or recovery from childbirth, and 2) all other kinds of leave, that is parental leave, safety leave, caregiving leave, and deployment-related leave. Workers can receive up to 12 weeks of leave in each of the two categories per benefit year; however, benefits will be capped at 20 weeks a year for employees who take advantage of both.

The law will cover nearly all employees in Minnesota, including both private sector and state and local government employees.  It will cover employees regardless of employer size and include both full-time and part-time workers, with a limited exception for certain seasonal workers.

The implementation of this new law is still some time away, but starting in mid-2024, most Minnesota employers will be required to submit a wage detail report, which will detail the quarterly wages received and hours worked for each employee.

Earned Sick and Safe Ordinance for City of Bloomington 

The City of Bloomington has adopted an Earned Sick and Safe Leave (ESSL) Ordinance for workers in the City that will go into effect on July 1, 2023.  The ordinance is similar to the City of Minneapolis ordinance that has been in effect since 2017.

The Bloomington ordinance will generally require employers to provide certain employees working in the City of Bloomington with up to 48 hours of paid ESSL per year.  The ordinance covers all employees (including part-time and temporary employees) performing work in Bloomington for at least 80 hours in a year for their employer.  A covered employee can use accrued ESSL beginning 90 calendar days following commencement of their employment.

Like the Minneapolis ordinance, the Bloomington ordinance requires employers with an employee handbook to include in their employee handbook a notice of employee rights and remedies under the law.  The rules clarify that this requirement also applies if the employer provides any type of “orientation material” to a new employee in lieu of a handbook.