June 22, 2023

Volume XIII, Number 173

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Minnesota Enacts Ban on Non-Competition Agreements

On May 24, 2023, Minnesota Governor Tim Walz signed SF 3035, a sweeping omnibus bill that addresses a laundry list of employment topics (the Law).  Among the new restrictions, the Law contains a near-total ban on non-compete agreements, which goes into effect July 1, 2023.

Specifically, any non-compete agreements entered into on or after July 1, 2023, will be void and unenforceable under Minnesota law, although any other valid provision in the agreement or contract can be enforced.  The definition of non-compete agreement includes any agreement between an employee and employer that restricts the employee, after termination of employment, from performing:  (1) work for another employer for a specified period; (2) work in a specified geographical area; or (3) similar work for another employer.  The Law also applies to agreements with independent contractors.  The Law further requires that any non-compete dispute be governed by Minnesota law and adjudicated in a Minnesota forum, thereby invalidating any choice of law or forum selection clause to the contrary.  Employers may not require employees who primarily reside and work in Minnesota to agree to these provisions as a condition of employment. 

Notably, the Law does not prohibit non-competes entered into in:  (1) conjunction with the sale of a business to restrict the seller from carrying on a similar business within a reasonable geographic area and for a reasonable length of time; or (2) anticipation of the dissolution of a business where some or all owners are restricted from carrying out a similar business within a reasonable geographic area.  The Law also does not apply to non-disclosure agreements and non-solicitation agreements. 

Following passage of the Law, Minnesota has joined a growing number of states—including California, North Dakota, and Oklahoma—that have enacted near-total bans on non-compete agreements.  New York may soon be on that list.  Employers with Minnesota-based workers should take the opportunity to re-evaluate their restrictive covenant templates to ensure compliance with the Law. 

 

Lindley Savage contributed to this article.

© 2023 Vedder PriceNational Law Review, Volume XIII, Number 172
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About this Author

 Alex C. Weinstein Vedder Price Labor and Employment Litigation Chicago
Associate

Alex C. Weinstein is an Associate at Vedder Price and a member of the firm’s Labor and Employment practice group in the Chicago office.

His practice includes representing employers in all aspects of employment litigation and counseling. His litigation practice includes class and collective actions, general labor and employment issues, pay equity analysis and disputes, executive disputes, whistleblower claims, government contractor compliance, employee mobility disputes, and wage and hour litigation. He also advises clients on all aspects of employment law, including wage and hour...

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