State of Minnesota Soon to Ban Noncompete Agreements

On May 17, 2023, the Minnesota Legislature passed an Omnibus Labor Bill. If Governor Walz signs the bill, as expected, it will largely prohibit the use of noncompete agreements between employers and employees entered into starting July 1, 2023.

A noncompete agreement is a contractual agreement between employer and employee where the employee agrees not to work for a competitor or start their own competing business for a set period of time after they leave employment. Noncompete agreements are typically presented when the candidate is hired, and employment is often conditioned on the candidate’s agreement.

The new law will make these types of noncompete agreements unenforceable if they are signed on or after July 1, 2023. There are some narrow exceptions: noncompete agreements would be valid if they are part of a sale of the business or in anticipation of the dissolution of the business.

The law will not invalidate noncompete agreements signed in the past, so employers can continue to enforce their existing agreement. The law also specifically excludes certain related agreements, including nondisclosure agreements, nonsoliciation agreements, agreements designed to protect trade secrets and confidential information, and agreements preventing the use of customer lists. These agreements will be more important than ever for employers seeking to protect their business as they add new employees.

Employers who use noncompete agreements as part of their hiring practices should review their agreements and prepare for the new law. The attorneys at Smith Jadin Johnson stand ready to answer any questions you may have.