Pat O’Neill, III and Anisa Omar[1]
On May 24, 2023, Minnesota Governor Tim Walz signed into law a comprehensive Jobs, Labor & Employment Bill (S.F. 3035). The bill includes a provision which bans the practice of restricting competitive activity by former employees through non-compete agreements. The ban takes effect on July 1, 2023, and applies to non-compete agreements entered on or after that date.
The ban applies to any agreement that would restrict the employee or independent contractor, after termination 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 that is similar in nature to the employee’s previous role.
The ban applies to both employees and independent contractors, regardless of income. The bill also restricts employers from including choice-of law or choice-of-venue provisions that require disputes to be resolved outside of Minnesota or to require the application of non-Minnesota law. Further, the bill includes a fee shifting provision that gives an employee the right to void non-compete provisions entered into after July 1, 2023 and seek legal fees in enforcing that right.
The ban targets future employment agreements of all kinds, including separation and severance agreements. The ban is not retroactive, meaning that existing non-compete agreements remain enforceable in theory. In practice, courts will continue to view non-compete agreements with disfavor and litigants will likely point to the ban as further evidence that such provisions are against public policy, which may create an additional hurdle for employers attempting to enforce pre-existing non-compete agreements.
The bill permits non-compete agreements in two limited circumstances: (1) non-compete agreements ancillary to the sale of a business or (2) entered as part of the dissolution of a business. Additionally, the bill leaves intact employers’ ability to protect their existing customers and employees through narrowly tailored non-solicitation agreements and to safeguard their confidential information via non-disclosure provisions and confidentiality policies
The law will be codified in the Minnesota Statutes at Section 181.988. Minnesota joins North Dakota, California and Oklahoma in states that have enacted outright bans on employment non-compete agreements.
Employers should prepare to rethink their non-compete agreements and begin to update existing employment agreements to eliminate non-compete provisions as well as evaluate existing practices related to protective confidential information and good will through non-solicitation and non-disclosure provisions.
Reach out to a Larson • King attorney if you have any questions about the information above.
[1] Anisa Omar, University of St. Thomas School of Law, JD Candidate, May 2025.
