Non-Competes and Trade Secrets in Minnesota

What Did the Minnesota Non-Compete Ban Change?

Effective July 1, 2023, Minnesota banned most post-employment non-compete agreements (Minn. Stat. § 181.988). The law voids any covenant not to compete entered into on or after that date, with narrow exceptions.

A “covenant not to compete” is defined broadly: any agreement that restricts an employee or independent contractor from performing work for another employer for a specified period of time, in a specified geographic area, or in a capacity similar to their work for the current employer. The ban applies regardless of income level, job title, or access to sensitive information.

What the ban does not cover:

• Nondisclosure agreements protecting trade secrets and confidential information
• Non-solicitation agreements restricting solicitation of clients, customers, or employees
• Agreements not to use client or contact lists
• Non-compete agreements related to the sale or dissolution of a business

Non-compete agreements signed before July 1, 2023 are not automatically voided. They remain potentially enforceable under the reasonableness test courts applied when they were signed, examining whether the restriction protects a legitimate business interest, is reasonable in duration and geographic scope, and does not impose undue hardship. The analysis is fact-specific, and courts will examine the specific language of the agreement, the nature of the employee’s role, and whether enforcement would impose an unreasonable burden on the former employee’s ability to earn a living.

Choice of law considerations: If your employment agreement specifies that another state’s law governs, the non-compete provision may be enforceable even after Minnesota’s ban–but Minnesota courts may refuse to enforce a choice-of-law provision that circumvents the state’s public policy. This is an area of developing case law, and employers who rely on out-of-state governing law provisions should review them with counsel.

What Non-Solicitation Agreements Can Employers Still Enforce?

With non-competes off the table for new agreements, non-solicitation agreements have become the primary contractual tool for protecting client relationships and workforce stability.

Client/customer non-solicitation prevents the departing employee from soliciting or doing business with the employer’s clients for a specified period. Employee non-solicitation prevents the departing employee from recruiting the employer’s other employees.

To be enforceable, Minnesota courts require that the restriction:

• Protect a legitimate business interest – client relationships, customer goodwill, and workforce stability all qualify
• Be reasonable in scope – restrictions limited to clients the employee actually worked with are more defensible than blanket prohibitions
• Be reasonable in duration – courts have upheld restrictions of 12-24 months; beyond 24 months is harder to defend
• Be supported by adequate consideration – continued employment may suffice, but additional consideration (bonus, promotion, severance) strengthens the agreement

What constitutes “solicitation” is a fact-intensive question. A federal court in Minnesota has ruled that a mere announcement of a new position (such as a LinkedIn update) does not constitute solicitation, but an announcement that includes express solicitation of business or directs contacts to the new employer’s services likely crosses the line.

Practical guidance: If you are enforcing a non-solicitation agreement, focus on specific, documented instances of direct outreach to your clients or employees – not on general announcements or passive social media activity. Courts are more likely to grant injunctive relief when the employer can point to specific emails, phone calls, or meetings where the former employee targeted particular clients, rather than relying on broad allegations of competitive behavior.

New restriction (effective July 1, 2024): Minnesota now prohibits non-solicitation provisions in agreements between service providers and their customers that would prevent customers from soliciting or hiring the service provider’s employees or independent contractors. This applies to staffing agreements and outsourcing contracts, not direct employment relationships. There is an exception for certain computer professionals.

What Trade Secret Protections Exist Without a Contract?

Even without a non-compete or any written agreement, Minnesota employers have statutory protection for trade secrets under the Minnesota Uniform Trade Secrets Act (MUTSA), codified at Minn. Stat. § 325C.01 through § 325C.08.

Under MUTSA, a trade secret is information that (1) derives independent economic value from not being generally known to others who could benefit from it, and (2) is the subject of reasonable efforts to maintain its secrecy. This covers customer lists, pricing information, financial data, business plans, manufacturing processes, software code, marketing strategies, vendor relationships, and contract terms.

The critical element is reasonable efforts to maintain secrecy. If a company does not take concrete steps to protect information–passwords, access controls, confidentiality agreements, marked documents, need-to-know restrictions–it may not qualify for trade secret protection even if commercially valuable.

Misappropriation includes acquisition by improper means (theft, bribery, breach of duty, espionage) and disclosure or use without consent by someone who used improper means to acquire the information. An employee who memorizes a client list, downloads pricing data, or copies proprietary processes before leaving may be liable even without any written agreement.

Remedies under MUTSA:

• Injunctive relief – a court order stopping the former employee and their new employer from using the trade secret
• Damages – actual losses, unjust enrichment, and in cases of willful and malicious misappropriation, exemplary damages up to twice the compensatory amount
• Attorney’s fees – available if the misappropriation was willful and malicious, or if a claim was made in bad faith

Strengthen your position before an employee leaves: Use written nondisclosure agreements with all employees who access sensitive information. Mark documents as “Confidential” or “Trade Secret.” Limit access on a need-to-know basis. Use technical controls (password protection, access logs, encryption). Conduct exit interviews reminding departing employees of their obligations and recovering company materials. Document what the employee had access to before they leave.

The strength of a MUTSA claim depends heavily on the measures the employer took to protect the information. Companies that treat sensitive data casually–sharing it broadly, failing to use passwords, not marking documents–will struggle to convince a court that the information was truly a trade secret. The investment in protection measures before a departure is what makes enforcement possible after one.

Why Is Revoking Email and System Access the Most Overlooked Risk?

One of the most common post-employment disputes involves a former employee’s continued access to company email, cloud storage, or other digital systems. Cloud-based tools–Gmail, Microsoft 365, Slack, Dropbox, Google Drive–can be accessed from personal devices without special credentials, making this risk particularly acute.

Revoke access on the employee’s last day (or at the time of discharge for involuntary terminations):

• Company email accounts (including shared mailboxes and distribution lists)
• Cloud storage (Google Drive, SharePoint, OneDrive, Dropbox)
• CRM and client management systems (Salesforce, HubSpot, Clio)
• Accounting and financial systems (QuickBooks, Xero)
• Communication platforms (Slack, Teams, Zoom)
• VPN and remote desktop access
• Physical access (badge systems, alarm codes, keys)

The federal Computer Fraud and Abuse Act (18 U.S.C. § 1030) provides a civil cause of action against anyone who accesses a protected computer without authorization or exceeds authorized access. After the Supreme Court’s 2021 decision in Van Buren v. United States, if a former employee accesses systems after authorization has been revoked, that access is “without authorization” and may violate the CFAA. But if credentials were never revoked, the CFAA claim is significantly weaker.

Personal devices: If the employee used personal devices (BYOD), consider whether your policy allows remote wipe of company data, whether the employee synced company files to personal cloud accounts, and whether auto-saved passwords still grant access. Address these issues in your IT offboarding process, not after a problem surfaces. Companies without a written BYOD policy have limited options for recovering data from personal devices, because forcing a remote wipe of an employee’s personal phone or laptop raises its own legal risks if company data and personal data are commingled.

After revoking access: Set up email forwarding to the appropriate person for business continuity. Set an auto-reply notifying senders that the employee is no longer with the company. Monitor the former employee’s email for a reasonable period to catch any business communications that would otherwise be lost. Do not delete the email account immediately – you may need the contents for business purposes, legal holds, or dispute resolution. A reasonable retention period is at least 90 days, though employers involved in ongoing litigation or regulatory matters may need to preserve the account indefinitely under a litigation hold.

What Steps Should an Employer Take When a Key Employee Departs?

When a key employee departs–particularly one with access to clients, trade secrets, or sensitive systems–take these steps:

Immediate (day of departure):

1. Revoke all system and facility access
2. Collect company devices, keys, and materials
3. Remind the employee of post-employment obligations in writing
4. Preserve the employee’s email account and digital workspace

First week:

1. Send a formal letter outlining continuing obligations (non-solicitation, nondisclosure, return of materials)
2. Notify clients or customers of the transition, if appropriate
3. Review what data and files the employee accessed in their final weeks (access logs, download history)
4. If the employee is going to a competitor, assess whether proactive communication to the new employer about the employee’s obligations is appropriate

First month:

1. Monitor for signs of solicitation (client departures, employee recruitment, social media activity)
2. If you discover potential violations, consult an attorney immediately–delay weakens enforcement
3. If warranted, send a cease-and-desist letter to the employee and/or their new employer
4. Evaluate whether injunctive relief is necessary to prevent ongoing harm

Ongoing:

1. Document any evidence of misappropriation or solicitation
2. Assess whether the situation warrants litigation or whether a negotiated resolution is more practical
3. Update your agreements and policies based on lessons learned

What Post-Employment Tools Are Still Available to Minnesota Employers?

Tool	Still Available?	Key Requirement
Non-compete agreement	No (banned July 2023, with narrow exceptions)	Only for sale/dissolution of business
Non-solicitation agreement	Yes	Must be reasonable in scope and duration
Nondisclosure agreement	Yes	Must identify protected information
Trade secret protection (MUTSA)	Yes (no agreement required)	Must maintain reasonable secrecy measures
CFAA claim (unauthorized access)	Yes	Must revoke access to establish “without authorization”
Severance agreement with release	Yes	Must provide adequate consideration and comply with OWBPA/MHRA

What Mistakes Do Employers Make Most Often?

Relying on a non-compete that no longer exists. If your standard employment agreement still contains a non-compete provision signed after July 1, 2023, that provision is void. Update your agreements to focus on non-solicitation and nondisclosure.

Failing to revoke system access. Every day a former employee retains access to your systems is a day of risk and a day that weakens your legal position if you later need to bring a CFAA claim.

Not having written agreements at all. MUTSA provides baseline trade secret protection, but written nondisclosure and non-solicitation agreements are far stronger tools. Every employee with access to client relationships or confidential information should have a written agreement.

Waiting too long to act on violations. If a former employee is soliciting your clients or using your trade secrets, delay signals to the court that the harm is not serious enough to warrant intervention. Act within weeks, not months.

Overreacting to routine departures. Not every departure requires aggressive enforcement. Save your legal resources for situations where there is real evidence of misappropriation or solicitation–not for employees who simply took a better job.

Ignoring the IT offboarding process. Many employers focus on the legal and HR aspects of separation and forget the technical side. A departing employee who retains access to a shared Google Drive, a CRM system, or a project management tool can continue accessing sensitive business information indefinitely. IT offboarding should be a standard checklist item for every departure, not an afterthought triggered only when a problem is discovered. Assign responsibility for the IT checklist to a specific person – typically the IT administrator or office manager – so that no departure slips through without a complete access review.

When Should an Employer Consult an Attorney?

Post-employment enforcement involves intersecting federal and state laws, recent statutory changes, and fact-intensive analysis. Consider legal counsel when:

• A key employee is leaving for a direct competitor
• You discover evidence of data downloads, client solicitation, or trade secret misappropriation
• You need to evaluate whether a pre-2023 non-compete is still enforceable
• You are drafting new employment agreements and want enforceable post-employment protections
• You are considering seeking injunctive relief (a temporary restraining order or preliminary injunction)
• A former employee’s new employer contacts you about the employee’s obligations

The cost of proactive legal guidance is a fraction of the cost of losing a trade secret or a key client relationship. Early intervention also preserves your options – waiting too long can foreclose the possibility of injunctive relief, weaken your damages position, and signal to the court that you did not take the threat seriously.

For guidance on protecting your company after an employee departure, contact Aaron Hall, attorney for business owners, at aaronhall.com or 612-466-0040.

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Aaron Hall is a Minneapolis business attorney who represents business owners in employment matters, trade secret protection, and post-employment disputes.

For more on structuring enforceable post-employment agreements, see the Contracts practice area.