Minnesota - In a move to protect employee rights, Governor Tim Walz of Minnesota signed bill SF 3035 on May 24, 2023, introducing significant restrictions on non-compete agreements and provisions within the state. The impact of this legislation extends to all employers with one or more employees working in Minnesota and will take effect on July 1, 2023.

Employers must take swift action to ensure compliance with the new regulations by reviewing and updating any existing agreements that include non-compete provisions. This includes agreements such as Confidentiality Agreements, Non-Disclosure Agreements, Employment Contracts, Offer Letters, Separation Agreements, Consulting Agreements, and Stock Award Agreements.

Under the new law, employers are no longer permitted to require employees to sign agreements containing non-compete provisions. The term “non-compete” encompasses any provision that restricts an employee or independent contractor from engaging in similar work for another employer within a specific period, geographic area, or in a capacity akin to their current or past employment.

However, the bill recognizes exceptions for non-compete provisions in the context of business sales or dissolutions. In such cases, key individuals involved in the transaction may agree to limited non-compete provisions, provided they restrict engagement in a similar type of business, within a reasonable geographic area, and for a reasonable period of time.

It is important to note that the bill is specific to non-compete provisions and does not encompass non-disclosure agreements or agreements designed to protect trade secrets and confidential information.

Furthermore, the legislation grants employees the right to recover attorneys’ fees when enforcing their rights under the law, reinforcing the commitment to safeguarding employee interests.

Existing agreements entered into before July 1, 2023, are not affected by the new regulations. However, any agreements made on or after this date will be subject to the revised requirements.

In a crucial clarification, the bill states that the presence of an unenforceable non-compete provision within an agreement will not render the entire agreement unenforceable. The prohibition on requiring employees to sign agreements with non-compete provisions is a notable change, as it puts the onus on employers to seek alternative means of protecting their business interests without unduly hindering employees’ professional growth and opportunities.

Employers should be aware that attempts to circumvent the law’s requirements by employing venue or choice of law provisions favoring other states will be prohibited. Moreover, employers cannot compel employees who reside and primarily work in Minnesota to adjudicate claims outside the state. The legislation allows for limited exceptions in cases involving the sale or dissolution of a business, where key individuals involved in the transaction may agree to non-compete provisions. However, these exceptions are subject to stringent conditions, ensuring that such provisions remain reasonable and proportional.

The implementation of these restrictions on non-compete agreements signifies a significant shift towards protecting the rights of employees in Minnesota. Employers are advised to familiarize themselves with the revised regulations, seek legal counsel, and swiftly adapt their practices to ensure compliance.

Disclaimer: This news article is for informational purposes only and should not be construed as legal advice. Please consult with legal professionals to understand how the EEOC’s guidance may apply to your specific circumstances. Employers are encouraged to consult with legal professionals to understand how the new regulations may impact their specific circumstances and ensure compliance with applicable laws.