The Minnesota legislature is currently considering HF999, which would ban all non-compete agreements with all Minnesota employees making less than a certain salary threshold, and would require garden leave payments for employees making higher incomes. The bill is being heard by the Minnesota House of Representatives’ Labor, Industry, Veterans and Military Affairs Finance and Policy Committee on February 22, 2022.
The bill would prohibit all non-competes except when the employee earned an annual salary at least equal to the median income for a four-person family in Minnesota as determined by the U.S. Census Bureau (around $78,000 according to most recent data) for the most recent year before the employee’s termination, and provided the employer pays the employee during the non-compete period at least half the employee’s highest annualized base salary in the last two years of employment.
The bill raises several unanswered questions. It is unclear whether the bill’s use of the terms “salary” means it applies only to salaried exempt employees, if “salary” includes other forms of compensation, and how it is measured. For example, if an employee earned $100,000 annually, but take a 3-month unpaid medical leave, it is unclear whether the salary threshold is met. It is also unclear whether a non-compete would be enforceable for an employee employed less than two years, since that employee would not have a previous two years of annualized salary from which to measure the garden leave payment.
Despite these questions, one thing appears clear from the bill’s void provision – it applies only to non-compete restrictions, and not to customer non-solicits, employee non-solicits, and non-disclosure obligations.
Finally, employers would not be able to contract around these prohibitions by including a non-Minnesota choice-of-law provision, at least with respect to employees who do not have legal counsel. The bill would make those provisions voidable at the employee’s discretion. The bill also allows an award of attorney’s fees to an employee who seeks to void the provision.
We will continue monitoring the bill and provide updates as necessary. To discuss further, feel free to contact Joel Andersen at firstname.lastname@example.org or Katie Connolly at email@example.com.