As OG+S’s attorney licensed in Minnesota and on the heels of last week’s post about the FTC proposed rule related to non-compete clauses, I figured I should cover recent changes in Minnesota law related to non-compete agreements. If you are looking for some helpful context about non-competes, Collin’s post provides helpful context. For agreements entered into on or after July 1, 2023, Minnesota law deems non-compete clauses generally void and unenforceable. This generally includes any agreement between an “employer” (defined broadly) and an “employee” (also defined broadly, including independent contractors). What’s more, the law prohibits use of choice of law or venue clauses. In other words, an agreement involving a Minnesota employee cannot force laws other than Minnesota’s to apply to the non-compete, nor can it force any dispute related to the non-compete to be heard outside of Minnesota. Finally, if such a dispute goes to court or arbitration, the court can award attorney’s fees to the employee, thus deterring employers from including non-competes in their agreements.
After addressing the highlights, it might be helpful to point out some of its limits and exceptions:
- Non-competes in agreements entered into prior to July 1, 2023, are still enforceable.
- Non-competes are still enforceable if they involve the sale or dissolution of a business, and the employee is an owner of the business being sold or dissolved.
- Employers can still prevent employees from competing with the company while the employee is working for the employer.
- Employers can still use agreements to prevent employees from disclosing confidential information or soliciting customers of the employer.
- If an agreement contains an unenforceable non-compete, only that specific provision is struck from the agreement. In other words, an unenforceable non-compete does not invalidate the whole agreement, just the non-compete specifically.
Now that the description of the law is out there, here are my takeaways:
- Take stock of your contracts and what’s in them. This is especially the case for our readers in Minnesota or with Minnesota employees, but certainly still something to consider for our readers outside of Minnesota. Even if all of your active agreements were entered into prior to July 1, 2023, your templates for future agreement may need to be updated to comply with the law.
- Rethink the strategies for protecting the company. If non-competes are going to become more difficult to enforce, then it might be worth thinking more about what threats from former employees the company is trying to protect against and adjust strategies from there to exclude non-competes. If it’s the disclosure of confidential information, you might consider leaning more into non-disclosure terms, as well as internal policies to limit the disclosure of confidential information to a short list of employees. If it’s poaching company clients, consider non-solicitation terms.
- When in doubt, get help. Getting your attorney involved can help you with #1 and #2.
Thanks for reading!