Tag Archive for: employment contract

Are Non-Compete Agreements Still Enforceable in Minnesota?

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Minnesota significantly changed its non-compete law in 2023. Under the statute, most non-compete agreements entered into on or after July 1, 2023 are void and unenforceable. The law defines a “covenant not to compete” as an agreement that restricts an employee, after leaving employment, from working for another employer, working in a geographic area, or working in a similar role. See Minn. Stat. § 181.988.

The new law was designed to make it easier for employees to change jobs without fear of legal threats from former employers. But the statute does not prohibit every type of post-employment restriction. Employers may still require agreements protecting confidential information, trade secrets, or client relationships, such as non-solicitation provisions.

The law also prevents employers from requiring Minnesota employees to litigate employment disputes outside Minnesota or under another state’s law as a condition of employment. This protection applies to employees who primarily live and work in Minnesota. See Minn. Stat. § 181.988, subd. 3.

Even with the new statute, questions about enforceability still arise. The answer may depend on when the agreement was signed, how it is written, and whether it is truly a non-compete or another type of restriction. If you have questions about a noncompete agreement, contact us today.

Minnesota & Federal Trade Commission Seek to End Oppressive Noncompete Agreements

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On January 19, 2022, the Federal Trade Commission (FTC) proposed a rule that would broadly ban the use of noncompete clauses by employers with respect to employees, independent contractors, and volunteers. Specifically, the proposed rule would make it illegal for an employer to enter into any noncompete agreement. It would also bar any attempt to enter into a noncompete. It would even bar maintaining a noncompete agreement with a worker. And, under some circumstances, it prohibits employers from telling a worker they are subject to a noncompete agreement.

Employers use noncompete agreements across industries and job levels to limit the movement of employees, including, for example, hairstylists, teachers, and physicians. Often included in the initial employment contract, noncompete clauses typically block employees from working for a competing employer or starting a competing business within a certain geographic area for a specified time period following the termination of employment.

Noncompete agreements have a debilitating effect on employees. Oftentimes, potential employees are forced into signing noncompete agreements in order to obtain employment, with limited, if any, bargaining power on their end of the agreement. Noncompete agreements limit employees’ ability to practice their trade and stagnate competition in the broader economy. Research has shown that noncompete agreements negatively affect competition in labor markets and reduce wages for employees across the labor force, even those not bound by noncompete agreements. In other words, noncompete agreements harm labor market competition by stopping employees from seeking out better job opportunities and preventing employers from hiring the best talent.

By banning noncompete agreements, the FTC estimates an increase in wages by nearly $300 billion per year and expanded career opportunities for nearly 30 million Americans. The National Employment Lawyers Association (NELA), an organization of lawyers who, like Kitzer Rochel, fight for workers’ rights, supports the rule.

The FTC proposed rule falls within a nationwide trend toward banning noncompete agreements. Minnesota has also introduced a bill banning noncompete agreements, following states such as California and North Dakota.

If you have questions about noncompete agreements—or any of the proposed rules and legislation—please contact Kitzer Rochel today.

Excessive Use of Overly Broad Non-Compete Agreements being Called into Question

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Non-compete agreements, a certain type of restrictive covenant, have been somewhat common between employers and employees for decades. But the use of non-competes, particularly very broad and restrictive ones, has spread expansively in recent years.

Initially designed to be a fair tool for employers to maintain certain key trade secrets and essential client bases, non-competes were originally contracts that employees voluntarily entered into and were paid a fair amount in exchange for doing so. Over the years, however, non-competes have become virtually mandatory and restrict employees from being able to leave their employer in exchange for nothing—typically only in exchange for “continued employment,” which is essentially value-less when employment is “at will.”

Moreover, while non-competes used to be limited to certain fields—such as highly technical scientific or intellectual property fields, or valuable high-level sales roles—they are now becoming common place in almost every conceivable area of work, from delivery drivers to journalists to hair stylists.

The proliferation of non-compete agreements, and their use as a tool to pressure employees into staying for worse terms and conditions of employment are finally starting to be called into question. As a recent article notes, the use of non-competes is becoming “outrageous,” and is catching the attention of attorneys general, the media, and hopefully courts as well.

Non-competes have historically been enforced quite strictly and rigidly, especially in Minnesota. If you are asked to sign a non-compete, or if you have already signed one and have questions about it, please contact us today because there are many nuances and laws that may apply, and the field may be changing significantly in the near future.