The Minnesota Omnibus Jobs Bill – Part I: Non-Compete Agreements

For those not paying attention, there were a few things going down at the Minnesota Legislature this last session.  From a spectator’s perspective, this was the most aggressive legislative session in recent memory, with major changes taking place in all facets of Minnesota government.  Now, we’re sure you all thought we were going to start with the marijuana laws that will be taking effect this summer, but we’ve matured (those will be next month).  Today is the first of several posts we’ll be putting out discussing changes in the Minnesota employment landscape through the Minnesota Omnibus Jobs Bill, which is set to be signed by the Governor.

First, maybe the least dramatic change this year has to do with non-compete agreements with employees.  The reason we say this change is not dramatic is because it was clear the direction Minnesota was headed with non-competes just last year.  However, instead of limiting their usage to certain situations, the legislature has made them void and unenforceable.

Under the bill, a “covenant not to compete” is defined as “an agreement between an employee and employer that restricts the employee, after termination of the employment, from performing:

  • Work for another employer for a specified period of time;
  • Work in a specified geographical area; or
  • Work for another employer in a capacity that is similar to the employee’s work for the employer that is party to the agreement.”

Not included in that definition are nondisclosure agreements, confidentiality agreements, non-solicitation agreements, or agreements “restricting the ability to use client or contact lists.” Any non-compete agreements are considered void and unenforceable, unless they are connected to the sale of a business or made in anticipation of the dissolution of a business.

In addition, the new law forbids employers from inserting “governing law” sections to employment agreements that would force employees who perform the majority of their work in Minnesota to have claims arising out of an employment agreement covered by the laws of another state.  So, if any employers are looking to “back door” a non-compete into their employment contracts in that manner, it won’t work here.

The legislation is set to take effect on July 1, 2023, and will only apply to contracts entered into on or after that date.  So if you’re looking to hire an employee and make them subject to a non-compete, you’d better do it soon (making sure you follow all of the rules already in place for valid non-competes)!

Employers will now have to shift their focus to reasonably drafted and narrowly-tailored non-solicitation and confidentiality agreements in order to protect these sorts of interests.  We’ve drafted dozens over the years in various types of workforces, so we can help you there.

This is just a starting point for all of the employee- (and union-) friendly laws that are set to be signed into law during this session, so employers need to buckle in and get prepared.  If you, or your organization need assistance in navigating any of the new bills set to become law this summer, contact Wiley Reber Law, for legal advice that works.  Also, stay tuned for future legislative updates every week in the coming month.  There’s a lot to learn, and we’re here to help you through it!