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HF1768 (Legislative Session 94 (2025-2026))

Additional circumstances under which a covenant not to compete is valid and enforceable provided.

Related bill: SF3288

AI Generated Summary

This bill proposes amendments to Minnesota Statutes 2024, section 181.988, subdivision 2, concerning the validity and enforceability of covenants not to compete in employment contracts.

Key Amendments:

  1. General Rule:

    • Covenants not to compete are generally void and unenforceable.

  2. Exceptions (Valid and Enforceable Non-Compete Agreements) A covenant not to compete is allowed in the following cases:

    • High-Earning Employees with Specific Duties:
      • Employees earning $120,000 or more annually, whose primary duties involve:
      • Research and development
      • Creation, analysis, or modification of confidential, proprietary, or trade secret information
      • Managing a project team or department that handles such sensitive data
      • Employees earning $500,000 or more annually, regardless of job duties.

  • Sale of a Business:

    • A temporary and geographically restricted non-compete can be agreed upon between the seller and buyer of a business.

  • Dissolution of a Business:

    • Partners, members, or shareholders dissolving a partnership, LLC, or corporation may agree not to carry on a similar business within a reasonable geographic area.
  1. Additional Provisions:
    • Invalid non-competes do not affect the enforceability of other contract provisions.
    • Courts may award reasonable attorney fees to an employee enforcing their rights under this section.

Impact:

  • Expands circumstances under which non-compete agreements are allowed, particularly for high-earning employees and business transactions.
  • Strengthens employee protections, ensuring non-compete clauses are not broadly applied.
  • Provides legal enforcement mechanisms, including injunctive relief and attorney fees.

Bill text versions

Actions

DateChamberWhereTypeNameCommittee Name
March 02, 2025HouseFloorActionIntroduction and first reading, referred toWorkforce, Labor, and Economic Development Finance and Policy
March 02, 2025HouseFloorActionIntroduction and first reading, referred toWorkforce, Labor, and Economic Development Finance and Policy
March 04, 2025HouseFloorActionAuthor added
March 12, 2025HouseFloorActionCommittee report, to adopt
March 12, 2025HouseFloorActionSecond reading

Citations

 
[
  {
    "analysis": {
      "added": [
        "Additional conditions under which covenants not to compete are valid."
      ],
      "removed": [
        ""
      ],
      "summary": "This legislation updates the circumstances under which covenants not to compete are enforceable under section 181.988.",
      "modified": [
        "Adjustments to existing conditions for covenants not to compete."
      ]
    },
    "citation": "181.988",
    "subdivision": "subdivision 2"
  }
]

Sponsors