For those employers who have not yet modified their Minnesota employment and non-compete templates, the time is now. Pursuant to MN SF 3035, as of July 1, 2023, Minnesota employers are prohibited from entering into post-employment non-compete agreements with employees and individual independent contractors.
Minnesota became the fourth state to impose a near-complete ban on non-compete agreements, joining California, Oklahoma, and North Dakota. The Minnesota law applies to all agreements which restrict employment for a specific period of time, in a specific geographic area or in a similar capacity, and it applies to all employees and individual independent contractors regardless of seniority or income. There are limited exceptions, including for non-competes entered into on or before July 1, 2023, and non-competes in the sale of business or dissolution of business contexts. Further, the law does not apply to non-disclosure, non-solicitation, trade secret, or confidentiality agreements, and it does not prohibit concurrent employment restrictions on current employees and independent contractors.
The law also prohibits employers from requiring employees who primarily reside and work in Minnesota, as a condition of employment, to agree to provisions in an agreement that would require the employee to adjudicate outside of Minnesota a claim arising in Minnesota or would deprive the employee of the substantive protection of Minnesota law with respect to a controversy arising in Minnesota.
Employers with Minnesota-based workers should carefully review their employment and protective covenant agreements to ensure compliance with Minnesota’s new law. A court may award an employee enforcing rights under the law with reasonable attorneys’ fees in addition to injunctive relief.
* Mikayla Brody is a summer associate in the firm’s Chicago office.