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HF 3673

as introduced - 91st Legislature (2019 - 2020) Posted on 02/24/2020 02:42pm

KEY: stricken = removed, old language.
underscored = added, new language.
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A bill for an act
relating to labor standards; prohibiting covenants not to compete; imposing
penalties; amending Minnesota Statutes 2018, section 177.27, subdivision 4;
proposing coding for new law in Minnesota Statutes, chapter 181.

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

Section 1.

Minnesota Statutes 2018, section 177.27, subdivision 4, is amended to read:


Subd. 4.

Compliance orders.

The commissioner may issue an order requiring an
employer to comply with sections 177.21 to 177.435, 181.02, 181.03, 181.031, 181.032,
181.101, 181.11, 181.13, 181.14, 181.145, 181.15, 181.172, paragraph (a) or (d), 181.275,
subdivision 2a
, 181.722, 181.79, deleted text begin anddeleted text end 181.939 to 181.943, new text begin and 181.99, new text end or with any rule
promulgated under section 177.28. The commissioner shall issue an order requiring an
employer to comply with sections 177.41 to 177.435 if the violation is repeated. For purposes
of this subdivision only, a violation is repeated if at any time during the two years that
preceded the date of violation, the commissioner issued an order to the employer for violation
of sections 177.41 to 177.435 and the order is final or the commissioner and the employer
have entered into a settlement agreement that required the employer to pay back wages that
were required by sections 177.41 to 177.435. The department shall serve the order upon the
employer or the employer's authorized representative in person or by certified mail at the
employer's place of business. An employer who wishes to contest the order must file written
notice of objection to the order with the commissioner within 15 calendar days after being
served with the order. A contested case proceeding must then be held in accordance with
sections 14.57 to 14.69. If, within 15 calendar days after being served with the order, the
employer fails to file a written notice of objection with the commissioner, the order becomes
a final order of the commissioner.

Sec. 2.

new text begin [181.99] COVENANTS NOT TO COMPETE PROHIBITED.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin For purposes of this section, the following terms have the
meanings given them:
new text end

new text begin (a) "Covenant not to compete" means an agreement, entered into between the employer
and an employee, that restricts or prohibits the employee from engaging in a lawful
profession, trade, or business of any kind, including but not limited to the prohibition of:
new text end

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

new text begin (2) any work in a specific geographic area; or
new text end

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

new text begin (b) "Employee" means any individual employed by an employer and also includes
individuals classified as independent contractors.
new text end

new text begin (c) "Employer" has the meaning given in section 177.23, subdivision 6.
new text end

new text begin (d) "Franchisee" and "franchisor" have the meanings given to them in section 80C.01,
subdivisions 5 and 6.
new text end

new text begin (e) "Nonsolicitation agreement" means an agreement between an employer and employee
that prohibits solicitation by an employee, upon termination of employment, of:
new text end

new text begin (1) any employee of the employer to leave the employer; or
new text end

new text begin (2) any customer of the employer to cease or reduce the extent to which it is doing
business with the employer.
new text end

new text begin Subd. 2. new text end

new text begin Prohibition on covenants not to compete. new text end

new text begin (a) No employer shall enter into,
enforce, or threaten to enforce a covenant not to compete with any employee of the employer,
who in any workweek is engaged in commerce or in the production of goods for commerce
or is employed in an enterprise engaged in commerce or in the production of goods for
commerce. Such a covenant not to compete is void and unenforceable against the employee.
new text end

new text begin (b) An employer who employs an employee, who in any workweek is engaged in
commerce or in the production of goods for commerce or is employed in an enterprise
engaged in commerce or in the production of goods for commerce, shall post notice of the
provisions of this section in a conspicuous place on the premises of the employer.
new text end

new text begin Subd. 3. new text end

new text begin Prohibition on franchisors. new text end

new text begin (a) No franchisor may restrict, restrain, or prohibit
in any way a franchisee from soliciting or hiring an employee of a franchisee of the same
franchisor.
new text end

new text begin (b) No franchisor may restrict, restrain, or prohibit in any way a franchisee from soliciting
or hiring an employee of the franchisor.
new text end

new text begin (c) No franchisee may restrict, restrain, or prohibit in any way other franchisees from
soliciting or hiring an employee of a franchisee of the same franchisor.
new text end

new text begin (d) No franchisee may restrict, restrain, or prohibit in any way other franchisors from
soliciting or hiring an employee of a franchisor.
new text end

new text begin Subd. 4. new text end

new text begin May bring action. new text end

new text begin An employee claiming to be aggrieved by a violation of
this section may bring a civil action for damages and injunctive relief against the employer.
new text end

new text begin Subd. 5. new text end

new text begin Judgment; damages and penalties. new text end

new text begin (a) If the court finds that a defendant has
violated this section, the court shall enter judgment for the actual damages incurred by the
plaintiff or the appropriate penalty as provided by this subdivision, whichever is greater.
The court may also award court costs and a reasonable attorney fee.
new text end

new text begin (b) Either the court or the commissioner shall assess a $5,000 per employee penalty if
an employer violates subdivisions 2 or 3. The ability of the commissioner to assess a penalty
under this section is in addition to the commissioner's authority in section 177.27,
subdivisions 4 and 7. Penalties assessed under this section shall be awarded to the employee
plaintiff, not to the court, commissioner, or Department of Labor and Industry.
new text end

new text begin Subd. 6. new text end

new text begin Exceptions. new text end

new text begin (a) Nothing in this section shall preclude an employer from entering
into an agreement with an employee to not share any information, including after the
employee is no longer employed by the employer, regarding the employer or the employment
that is a trade secret, as defined in section 325C.01, subdivision 5.
new text end

new text begin (b) Nothing in this section shall preclude an employer from entering into a nonsolicitation
agreement, confidentiality agreement, or a covenant with a person purchasing or selling the
goodwill of a business or otherwise acquiring or disposing of an ownership interest.
new text end

new text begin (c) Notwithstanding this subdivision, if an employer prevents an employee from securing
any work with another employer, that employer must continue to compensate the employee
at the rate the employee received at the end of the employee's employment with the employer.
new text end

new text begin (d) Any employment agreement preventing an employee from securing work with another
employer under this subdivision is void if the duration provided for in the employment
agreement exceeds 12 months.
new text end

new text begin Subd. 7. new text end

new text begin Choice of law. new text end

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

new text begin (1) require an 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 that violates paragraph (a) is voidable by the employee
at the employee's discretion.
new text end

new text begin (c) This subdivision does not apply to a contract with an employee who is 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 EFFECTIVE DATE. new text end

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