On May 16, 2023, the Minnesota legislature passed SF 3035 (the “Bill”), banning nearly all post-termination non-compete agreements with employees and independent contractors. Although the Bill marks another state in the trend of jurisdictions passing laws limiting the use of employee non-competes, the Bill goes even further than most of the recent laws to join the ranks of California, Oklahoma, and North Dakota to ban practically all employee non-compete agreements. Some of the more notable provisions include:

• Banning non-compete agreements with all levels of employees and independent contractors, regardless of compensation or role, with only limited exceptions for non-competes entered into in connection with the sale of business or dissolution of a business;

• Requiring employers to use Minnesota law and forum;

• Allowing courts to award attorneys’ fees to plaintiffs who prove violations of the Bill; and

• Excluding nondisclosure and non-solicitation agreements from the Bill’s requirements.

Minnesota Governor Tim Walz is expected to sign the Bill. Once signed, the Bill will apply to all non-compete agreements entered into on or after July 1, 2023, but it would not apply retroactively to non-competes entered into before then. Employers with employees and independent contractors in Minnesota should start preparing for compliance with the Bill, including reviewing their template employment agreements with non-competes and considering updating their existing policies and...

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