In a bold move, the Minnesota Legislature has passed a bill that outlaws most covenants not to compete
signed on or after July 1, 2023. Governor Tim Walz signed the bill into law on May 24. The new law
plainly states, “Any covenant not to compete contained in a contract or agreement is void and unenforceable.”
This new law defines a “covenant not to compete” (a/k/a “noncompete”) as any agreement between an
employer and an employee that:
restricts the employee, after termination of the employment, from performing: (1) work for
another employer for a specified period of time; (2) work in a specified geographical area; or (3)
work for another employer in a capacity that is similar to the employee’s work for the employer
that is party to the agreement.
Nondisclosure agreements, trade secret and confidentiality agreements, restrictions on the use of client
and contact lists, and non-solicitation agreements are excluded from the definition, so they may still be
used. There are also exceptions for noncompete agreements that are part of a business sale or
dissolution.
The new law applies to all Minnesota employers and employees, regardless of size or type of business. It
defines employees to include independent contractors.
Perhaps one of the trickiest parts of the law is that it will only apply to agreements entered into on or
after July 1, 2023. That means that noncompete agreements signed before then, which some are calling
“legacy noncompete agreements,” will continue to be valid and enforceable, provided that they are
valid and enforceable under Minnesota law as it existed prior to July 1. But the strength of these now-
existing noncompetes has already been be eroded by several court cases, including St. Jude Medical, Inc.
v. Carter.
The main takeaways for the Minnesota workplace are:
– Starting July 1, 2023, restrictive covenants must be carefully drafted without noncompete
language but with the other restrictions that will still be allowed.
– Any revisions to legacy noncompetes must be carefully drafted so as to not unintentionally turn
them into new agreements that are banned.
– Any attempts to enforce legacy noncompetes must be carefully considered in light of these
changing laws.
Please contact us for more information on how to properly use and enforce noncompete agreements
and other such restrictions under these new legal standards.
