As the calendar flipped to 2023, the Federal Trade Commission proposed a rule to essentially ban non-compete agreements nationwide, referring to the use of these agreements as an “often exploitative practice that suppresses wages, hampers innovation, and blocks entrepreneurs from starting new businesses.” Now, the Minnesota Legislature is getting in on the act. Earlier in February, more than a dozen DFL House representatives introduced Bill HF 1237, intended to make covenants not to compete—i.e., non-compete agreements—void and unenforceable in the State of Minnesota.
What Are Some of the Key Provisions of HF 1237?
If you’re an employee laboring under a non-compete agreement in Minnesota, there’s a lot to like about HF 1237. Here are some key takeaways:
- The bill defines non-compete agreements broadly, and if enacted, would make any agreement unenforceable if it restricts an employee, after the end of the employment relationship, from: (a) working for another employer for a specified period of time; (b) working in a specific geographical area; or (c) working for new employer in a role that is similar to the role the employee had with the old employer.
- The bill also defines “employer” and “employee” broadly. An “employer” in this context would mean any person, group of persons, or business entity (including those who are directly or indirectly acting the employer’s interest in relation to the employee). And “employee” would mean anyone performing services for an employer, including independent contractors.
- Unless the employee is represented by a lawyer when negotiating their employment agreement, any choice-of-law or choice-of-venue in that agreement that specifies a law or forum other than Minnesota is void.
- Employees challenging a non-compete or non-Minnesota choice-of-law or choice-of-venue provision would be entitled to recover their attorneys’ fees incurred in connection with those efforts.
- Employers would have a 180 day “grace period” after the enactment of HF 1237 to notify employees that their non-competes were no longer enforceable, and to attempt to renegotiate those non-competes to conform with the new law. During that grace period, the employer cannot enforce any non-compete made unenforceable by the passage of this new law.
- HF 1237 would apply retroactively—meaning, it would apply to any proceedings that occurred after the passage of the bill, even if those proceedings related to agreements entered into before the passage of the bill.
What Does All of That Mean?
In a nutshell, if Bill HF 1237 is enacted, virtually all non-compete agreements in Minnesota would become unenforceable (and so would many choice-of-law and choice-of-venue provisions). Needless to say, this would have a dramatic impact on employees’ rights in Minnesota. If you have any questions about your non-compete agreement, we would be happy to discuss your rights with you. Please feel free to give us a call or send us a message through our website.