Changes in "non-compete" agreement

Among the many laws passed by the 2023 Minnesota Legislature is one prohibiting the use of most non-compete agreements by employers in the state. One common use of a “non-compete” clause is to have an employee who is leaving a business sign an agreement not to start a business which competes with the previous employer, or not to share information regarding the current job with any future employer. The new law was effective July 1.  Here’s a summary:

The ban on non-compete agreements is not retroactive. In other words, it only affects agreements entered into on or after July 1, 2023; non-compete agreements that were entered into before July 1 remain valid.

The law covers any person who lives or works in Minnesota, and it applies to both employees and independent contractors, regardless of what they are paid.

Only agreements restricting employees and contractors from working for a competitor over a specific period of time are covered by the law. Employers can still enter into agreements with employees and independent contractors to protect the company’s other employees, customer relationships, goodwill, confidential information, trade secrets, and intellectual property, by using non-solicitation, confidentiality and intellectual property covenants.

The new law does contain an important exception that allows non-compete agreements to be used when entered into pursuant to the sale of a business.