Update on noncompete agreements in Minnesota
By Larry Morgan, MAIR, SPHR, SHRM-SCP, GPHR
September 3, 2024
In July 2023 the Minnesota legislature maintained that noncompete agreements signed prior to July 1, 2023, would remain valid during the employee’s current employment period, but would not be enforceable after the employee left the current employer.
Trade secret, confidentiality and proprietary information nondisclosure agreements remain valid; however, the statute suggests that any such agreements should be narrowly defined to reflect employer interests and demonstrated need, cover only employees who have specific information that could harm employer, the agreements should be specific and recommunicated to employees on a regular basis.
Nonsolicitation agreements contained in offer letters, waiver and release documents and severance plans should also be reviewed carefully to avoid overly broad nondisclosure and nonsolicitation clauses that might be in violation of the National Labor Relations Act (NLRA) Section Seven.
This portion of the NLRA — which affects union and non-union employers — guarantees employees "the right to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection," as well as the right "to refrain from any or all such activities." This includes discussion with other employees regarding wages, hours, working conditions and other matters.
In addition, a new Minnesota law taking effect on July 1, 2024, will ban the use of nonsolicitation agreements by staffing agencies and other service providers to prevent their customers, or the companies that contract for the staffing agency’s services, from soliciting or hiring the staffing agency’s employees who provide the contracted temporary services.
Federal Trade Commission rule and update
On April 23, 2024, the Federal Trade Commission (FTC) issued a final rule banning almost all noncompete agreements between employers and their workers including independent contractors. The rule also prohibited overly broad nondisclosure and non-solicitation clauses.
The FTC ruling stated that effective Sept. 4, 2024, employers may not enter into new noncompetes or enforce existing noncompetes, except for agreements with
senior executives that were in place before the effective date. Senior executives were defined as employees “earning more than $151,164 annually who are in a policy-making position.”
The FTC rule also required employers to notify workers covered by nonagreements in writing by Sept. 4 that their noncompetes are unenforceable.
Update:
The FTC ruling has now been overturned by a federal court judge in Texas banning the FTC rule from taking effect on a national level, therefore no notice to employees is required and non-competes remain enforceable.
Employers should note that the Minnesota state ban on new non-competes remains in effect. The FTC has indicated they will appeal the federal court ruling. Employers should continue to monitor any updates on this ruling.
Larry Morgan, MAIR, SPHR, SHRM-SCP, GPHR, owner of Orion HR Group, LLC, provides consulting services on a wide range of HR issues. He has more than 40 years of HR experience with a broad range of industries. Larry is the voice behind the MNCPA HR Hotline and a regular contributor to the organization’s Footnote magazine. He has been quoted in HR Magazine, World at Work, Upsize Magazine, Minneapolis Star Tribune, St. Paul Pioneer Press, and many other respected publications.
