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Noncompetes in the Crosshairs: Takeaways From Minnesota's New Law

    Client Alerts
  • August 04, 2023

The ban on Minnesota noncompetes went live July 1, 2023, and employers who require employees to sign illegal noncompetes can be liable for attorneys' fees necessary in getting a court to nullify the restriction and/or enjoin the employer. Employers cannot avoid this ban — in litigation or arbitration — by including choice of law or venue terms that call for law other than Minnesota law or require employees to sue or defend claims in other states. If an employee works in Minnesota, any agreements are likely governed by Minnesota law and have to be litigated there.

However, the silver lining is that the law expressly is inapplicable to nondisclosure or confidentiality agreements, as well as non-solicitation agreements. The law does not address restrictions on recruiting/soliciting other employees to leave (aka "no-hire" terms), although the noncompete definition appears to exclude them. The law defines noncompete as any agreement that restricts the employee after termination from any one of these:

1. Working for another employer for a specified period of time.
2. Working in a specified geographical area.
3. Working for another employer in a similar capacity.

The ban also does not apply to restrictions linked to a sale of a business.
The bottom line is that employers should be auditing their use of noncompete agreements to find those at risk or that put the company at risk. Alternative methods of protecting information should be employed in the event the noncompetes are banned at a later date.