SF 405

as introduced - 93rd Legislature (2023 - 2024) Posted on 02/07/2023 03:44pm

A bill for an act
relating to employment; providing that covenants not to compete are void and
unenforceable; providing for the protection of substantive provisions of Minnesota
law to apply to matters arising in Minnesota; proposing coding for new law in
Minnesota Statutes, chapter 181.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

new text begin [181.987] COVENANTS NOT TO COMPETE VOID IN EMPLOYMENT
AGREEMENTS; SUBSTANTIVE PROTECTIONS OF MINNESOTA LAW APPLY.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) "Covenant not to compete" means an agreement between
an employee and employer that restricts the employee, after termination of the employment,
from performing:
new text end

new text begin (1) work for another employer for a specified period of time;
new text end

new text begin (2) work in a specified geographical area; or
new text end

new text begin (3) work for another employer in a capacity that is similar to the employee's work for
the employer that is party to the agreement.
new text end

new text begin (b) "Employer" means any individual, partnership, association, corporation, business
trust, or any person or group of persons acting directly or indirectly in the interest of an
employer in relation to an employee.
new text end

new text begin Subd. 2. new text end

new text begin Covenants not to compete void and unenforceable. new text end

new text begin (a) Subject to the exception
in paragraph (b), any covenant not to compete contained in a contract or agreement is void
and unenforceable.
new text end

new text begin (b) Notwithstanding paragraph (a), a covenant not to compete between an employer and
employee is valid and enforceable if:
new text end

new text begin (1) the employee earned an annual salary from the employer at least equal to the median
family income for a four-person family in Minnesota, as determined by the United States
Census Bureau, for the most recent year available at the time of the employee's termination;
and
new text end

new text begin (2) the employer agrees to pay the employee on a pro rata basis during the entirety of
the restricted period of the covenant not to compete at least 50 percent of the employee's
highest annualized base salary paid by the employer within the two years preceding the
employee's separation from employment.
new text end

new text begin (c) Nothing in this subdivision shall be construed to render void or unenforceable any
other provisions in a contract or agreement containing a void or unenforceable covenant
not to compete.
new text end

new text begin (d) In addition to injunctive relief and any other remedies available, a court may award
an employee who is enforcing rights under this section reasonable attorney fees.
new text end

new text begin Subd. 3. new text end

new text begin Choice of law; venue. new text end

new text begin (a) An employer must not require an employee who
primarily resides and works in Minnesota, as a condition of employment, to agree to a
provision in an agreement or contract that would do either of the following:
new text end

new text begin (1) require the employee to adjudicate outside of Minnesota a claim arising in Minnesota;
or
new text end

new text begin (2) deprive the employee of the substantive protection of Minnesota law with respect to
a controversy arising in Minnesota.
new text end

new text begin (b) Any provision of a contract or agreement that violates paragraph (a) is voidable at
any time by the employee and if a provision is rendered void at the request of the employee,
the matter shall be adjudicated in Minnesota and Minnesota law shall govern the dispute.
new text end

new text begin (c) In addition to injunctive relief and any other remedies available, a court may award
an employee who is enforcing rights under this section reasonable attorney fees.
new text end

new text begin (d) For purposes of this section, adjudication includes litigation and arbitration.
new text end

new text begin (e) This subdivision shall not apply to a contract with an employee who is in fact
individually represented by legal counsel in negotiating the terms of an agreement to
designate either the venue or forum in which a controversy arising from the employment
contract may be adjudicated or the choice of law to be applied.
new text end

new text begin Subd. 4. new text end

new text begin Severability. new text end

new text begin If any provision of this section is found to be unconstitutional
and void, the remaining provisions of this section are valid.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment and
applies to contracts and agreements entered into on or after that date.
new text end