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Minnesota to Ban All Non-Competes and Non-Solicits?

The Minnesota legislature is currently considering HF 3673, which purports to ban all non-compete agreements with all employees, and may also ban all customer non-solicit and non-disclosure agreements. The language of the bill—which currently has 30 co-sponsors—is confusing and internally contradictory, so its progress through the legislative process warrants close watching.

The bill would prohibit employers from enforcing and even entering into non-competes with all employees. All such agreements, as of the bill’s potential enactment date, would be void. Existing agreements would be unaffected. But notwithstanding that broad prohibition, the bill appears to allow non-competes of up to one year if the employer compensates the employee at the employee’s final pay rate—a concept generally termed “garden leave.” This give-and-take between total prohibition and the garden-leave exception is unclear.

While the bill does not expressly prohibit customer non-solicit and non-disclosure agreements, it creates an exception for those agreements only in the context of a business sale. One could read this exception to imply that all other customer non-solicit and non-disclosure agreements—those not in the business sale context—would be unenforceable. Again, the language is unclear.

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 new employees who do not have legal counsel. The bill would make those provisions voidable at the employee’s discretion.

We will continue monitoring the bill and provide updates as necessary. To discuss further, feel free to contact Joel O’Malley at jomalley@nilanjohnson.concreate new email or Katie Connolly at kconnolly@nilanjohnson.comcreate new email.

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