On July 1, 2023, Minnesota became the fourth state to ban non-compete agreements between employees and employers. The now not so new law makes it illegal to enforce employment contract provisions that restrict employees from working for a competitor or taking a similar position with another employer after their employment ends. RIP, non-competes? Yes, but anyone about to sign an employment agreement should nonetheless take a close look at the fine print.
Minnesota still allows employment contracts to limit an employee’s ability to seek business from customers of a former employer, or to solicit former colleagues to come join the employee’s new employer. Also still legal are provisions that protect confidential and proprietary information. An employee can’t abscond with a secret formula for making a product and use it to help a competitor start manufacturing the product.
The continued viability of non-solicit and confidentiality provisions in employment contracts makes sense, and should give employers much if not all of the protection they claim justified the old non-competes. Some employers, however, have started tweaking non-solicit or confidentiality language in an effort to effectively create extremely broad de facto non-competes. At Schaefer Halleen we regularly review contracts for employees, and we’ve started to see some that include truly bizarre limits on what someone can or can’t do after moving on to a new employer.
Perhaps the most egregious example of a “back door” non-compete is a provision that would have kept an employee from using “negative knowledge” after moving on to a new job. For example, if a mechanic learned while working for Employer A that it’s less safe to adjust a fan belt in a certain way, avoiding the unsafe method after moving on to Employer B would be a violation of the confidentiality provision. How such a provision would ever be enforced is quite an open question, but it’s a clear effort to limit use of skills learned while working for one employer after an employee moves on to another employer. Might an employer claim that a mechanic who started as an apprentice and ended with an advanced license can’t do anything but apprentice work for a subsequent employer?
So far, no extreme contract provision like the “negative knowledge” ban has been tested in court. One would hope it would be found invalid and unenforceable, but to date we have no official guidance. In the meantime, employees confronted with such bizarre language would be well advised to consult with a lawyer before signing their employment contracts.
At Schaefer Halleen, we focus on dissecting and challenging these tricky contract provisions. Don’t let hidden language trap you—contact us today for a thorough review of your employment agreement and safeguard your rights before signing.
