Minnesota Banned Non-Competes: Here’s What Still Protects Your Trade Secrets

The Historical Relationship Between Non-Competes and Trade Secrets

Non-compete agreements and trade secret law served overlapping but distinct purposes. Non-competes prevented former employees from working for competitors for a set period, creating a buffer zone that limited the opportunity to use or disclose confidential information. Trade secret law, under the Minnesota Uniform Trade Secrets Act (MUTSA, Minn. Stat. §§ 325C.01 to 325C.08), provided legal claims when someone actually misappropriated protected information.

In practice, many employers treated non-competes as their primary trade secret protection tool. The logic was straightforward: if a former employee cannot work for a competitor for 12 or 24 months, the risk of trade secret misuse drops significantly.

This approach had real weaknesses even before the ban:

Over-reliance on agreements. Some companies invested heavily in drafting non-competes but neglected the operational security measures (access controls, information classification, exit procedures) that MUTSA actually requires as “reasonable efforts to maintain secrecy.”

Broad application. Non-competes were often applied to employees who had no meaningful access to trade secrets, creating enforcement challenges and employee resentment without corresponding protection.

Uncertain enforceability. Minnesota courts applied a reasonableness test to non-competes, asking whether the restraint was necessary to protect the employer’s business or goodwill and imposed no greater restraint than reasonably necessary, with regard to the nature and character of the employment, the duration of the restriction, and its geographic reach (Bennett v. Storz Broadcasting Co., 270 Minn. 525, 533-34, 134 N.W.2d 892, 899 (1965)). Many agreements that looked strong on paper were narrowed or voided in court. For agreements entered on or after July 1, 2023, that case-by-case review is gone: the statute replaces it with a categorical bar (Minn. Stat. § 181.988, subd. 2(a)), and the reasonableness test now matters only to pre-ban agreements and to the surviving sale and dissolution exceptions.

False security. A signed non-compete gave employers a sense of protection that sometimes substituted for building real operational safeguards.

What Changed with the 2023 Non-Compete Ban

Minnesota Statute § 181.988 voids any covenant not to compete entered into on or after July 1, 2023, with limited exceptions. The key provisions:

Broad scope. The ban turns on what an agreement does, not what it is called. It reaches any agreement that restricts an employee, after termination, from working for another employer for a specified period, in a specified geographic area, or in a similar capacity (Minn. Stat. § 181.988, subd. 1(a)).

Limited exceptions. A non-compete remains valid and enforceable in only two situations, and both are keyed to business owners rather than ordinary employees:

• Sale of a business. The seller and the buyer may agree that the seller will not carry on a similar business within a reasonable geographic area and for a reasonable length of time, protecting the buyer’s purchased goodwill (Minn. Stat. § 181.988, subd. 2(b)(1)).
• Dissolution of a business. Upon or in anticipation of dissolving a partnership, limited liability company, or corporation, the partners, members, or shareholders may agree not to carry on a similar business within a reasonable geographic area where the business has been transacted (Minn. Stat. § 181.988, subd. 2(b)(2)). This exception is limited to dissolution of the entity itself. The statute uses the word “dissolution,” not “dissociation,” so it does not cover a single partner or member withdrawing while the entity continues.

No retroactivity. Non-competes signed before July 1, 2023, are unaffected: the ban applies only to contracts and agreements entered into on or after that date (Minn. Stat. § 181.988, effective date). Those pre-ban agreements remain subject to the reasonableness analysis Minnesota courts have long applied (Bennett v. Storz Broadcasting Co., 270 Minn. 525, 533-34, 134 N.W.2d 892, 899 (1965)).

Choice of law. The statute protects any employee who primarily resides and works in Minnesota. An employer cannot require such an employee, as a condition of employment, to agree to a provision that forces out-of-state adjudication of a Minnesota claim or strips away the substantive protection of Minnesota law. Any such provision is voidable at the employee’s election, after which the dispute is adjudicated in Minnesota under Minnesota law, so an employer cannot circumvent the ban by choosing Delaware or Texas law (Minn. Stat. § 181.988, subd. 3). “Adjudication” expressly includes arbitration, which closes the out-of-state arbitration workaround, though this protection reaches only claims arising under the statute itself.

Enforcement teeth. In addition to injunctive relief and any other available remedy, a court may award reasonable attorney fees to an employee who is enforcing rights under the statute, a real cost for an employer that keeps using banned clauses (Minn. Stat. § 181.988, subd. 2(d)).

What is not banned. The statute explicitly does not restrict non-solicitation agreements, nondisclosure agreements, or other restrictive covenants that do not prevent someone from working for a competitor (Minn. Stat. § 181.988, subd. 1(a)).

The Tools Still Available to Employers

The non-compete ban eliminated one tool. Several others remain, and when used together, they can provide trade secret protection that is more targeted and often more enforceable than a traditional non-compete.

Non-Disclosure Agreements (NDAs)

NDAs remain enforceable in Minnesota. The statute that voids covenants not to compete expressly excludes “a nondisclosure agreement, or agreement designed to protect trade secrets or confidential information” from the definition of a void non-compete (Minn. Stat. § 181.988, subd. 1(a)). Because a well-drafted NDA restricts only the use or disclosure of confidential information, not where or for whom a former employee may work, it stays enforceable regardless of where the employee lands next.

Advantages over non-competes. NDAs protect the information itself rather than restricting employment broadly. Courts tend to enforce them more readily because they impose a more proportional restriction: you can work anywhere, but you cannot take our secrets with you.

Key drafting considerations post-ban:

• Define protected information with specificity. Overly broad definitions (“all information learned during employment”) invite challenges. An NDA drafted so broadly that it functions as a de facto ban on future employment risks being treated as a void non-compete.
• Distinguish between confidential information (contractual protection) and trade secrets (statutory protection under MUTSA). Both should be covered, but the legal standards differ.
• Include clear obligations for returning and destroying confidential information upon departure.
• Specify remedies, including injunctive relief and attorney’s fees provisions.

Non-Solicitation Agreements

Agreements that restrict a former employee from soliciting the employer’s customers are expressly carved out of the non-compete ban and remain enforceable (Minn. Stat. § 181.988, subd. 1(a)). They address a specific risk: that a departing employee will use relationships and knowledge developed on the job to divert business or recruit colleagues. Escaping the statutory ban does not make a non-solicit automatically enforceable, though: the statute carves non-solicitation agreements out of its definition of a covenant not to compete without imposing any reasonableness requirement of its own on them.

Customer non-solicitation. Typically restricts the former employee from soliciting customers they worked with or had access to during employment. Duration of 12-24 months is common.

Employee non-solicitation. Restricts recruiting or soliciting current employees to leave. This protects against the “team lift” scenario where a departing manager tries to bring their entire team to a competitor.

Drafting post-ban. Because non-solicitation agreements are now doing more of the protective work that non-competes used to do, precision matters. Clearly define what constitutes “solicitation” (does it include responding to an inbound inquiry?), which customers or employees are covered, and the duration.

MUTSA and DTSA Claims

Trade secret statutes, both state (the Minnesota Uniform Trade Secrets Act) and federal (the Defend Trade Secrets Act, 18 U.S.C. § 1836), reach misappropriation directly. Under MUTSA, misappropriation includes acquiring a trade secret by improper means such as theft or espionage, or disclosing or using it in breach of a duty to maintain its secrecy, so misappropriation can occur without the wrongdoer having signed any agreement (Minn. Stat. § 325C.01, subds. 2-3). These statutes offer:

• Injunctive relief. Courts can enjoin actual or threatened misappropriation, order the return of trade secret materials, and, in appropriate circumstances, compel affirmative steps to protect the secret (Minn. Stat. § 325C.02). The DTSA authorizes the same relief in federal court (18 U.S.C. § 1836(b)(3)(A)).
• Damages. A trade secret owner may recover both the actual loss and the unjust enrichment not already counted in that loss, or, in lieu of either, a reasonable royalty for the misappropriator’s unauthorized use (Minn. Stat. § 325C.03). If the misappropriation is willful and malicious, the court may award exemplary damages of up to twice that entire compensatory award, not merely twice the actual damages, under both MUTSA (Minn. Stat. § 325C.03) and the DTSA (18 U.S.C. § 1836(b)(3)(C)).
• Attorney’s fees. A court may award reasonable fees to the prevailing party where the misappropriation is willful and malicious, but the fee statute cuts both ways: it also allows fees against a party that brings a misappropriation claim, or makes or resists a motion to terminate an injunction, in bad faith (Minn. Stat. § 325C.04).

The federal statute adds a tool MUTSA lacks: in extraordinary circumstances, a court may order the ex parte civil seizure of property necessary to prevent a trade secret from being propagated or disseminated, which is often the reason to sue federally rather than only in state court (18 U.S.C. § 1836(b)(2)). The DTSA also carries its own guardrails: a DTSA injunction cannot bar someone from taking a new job or otherwise conflict with state law against restraints on a lawful profession; any condition on employment must rest on evidence of threatened misappropriation, not merely on what the person knows, and a federal claim must be brought within three years of when the misappropriation was or should have been discovered (18 U.S.C. § 1836(b)(3)(A), (d)).

The existence of these statutory protections means that trade secret law (not contract law) should be the foundation of your protection strategy.

The Inevitable Disclosure Doctrine

Minnesota’s courts have neither adopted nor rejected the inevitable disclosure doctrine, so its status here is unsettled, not settled recognition (Katch, LLC v. Sweetser, 143 F. Supp. 3d 854, 870 (D. Minn. 2015)). MUTSA authorizes an injunction against actual or threatened misappropriation (Minn. Stat. § 325C.02), so an inevitable-disclosure theory can be raised even without a non-compete. But the standard is demanding: Minnesota courts that have considered the theory require the moving party to show a high degree of probability of inevitable disclosure (Katch, LLC v. Sweetser, 143 F. Supp. 3d 854, 870 (D. Minn. 2015)).

That bar is high. Merely knowing a former employer’s trade secrets and taking a comparable position with a competitor is not enough, and the Katch court could not find a single instance of a party meeting the standard and actually obtaining an injunction on that basis in Minnesota (Katch, LLC v. Sweetser, 143 F. Supp. 3d 854, 870 (D. Minn. 2015)). A more recent Minnesota Supreme Court decision recited the same caution: the district court there had rejected an inevitable-disclosure argument as “belied by the facts,” finding the employer showed only a “speculative fear of possible disclosure that is unsupported by the evidence” (St. Jude Med., Inc. v. Carter, 913 N.W.2d 678, 685 (Minn. 2018)). Treat inevitable disclosure as a narrow, uncertain backstop, not a reliable substitute for the tools above.

How to Restructure Employee Agreements Post-Ban

The non-compete ban requires employers to rethink their entire approach to employee agreements. Here is a practical framework.

Step 1: Audit Your Current Agreements

Review all existing employee agreements to identify:

• Non-competes signed before July 1, 2023 (still enforceable, track their terms and expiration)
• Non-competes signed on or after July 1, 2023 (void, replace immediately)
• NDAs and non-solicitation agreements (assess whether they are strong enough to carry the protective load without a non-compete backstop)

Step 2: Identify What You Are Actually Protecting

Many companies drafted non-competes without clearly identifying the trade secrets at stake. Now is the time to build a trade secret inventory:

• What information provides competitive advantage?
• Who has access to each category of trade secret?
• What would happen if a competitor obtained this information?

This inventory drives every subsequent decision, from who needs to sign what agreement to what security measures are required.

Step 3: Draft a Layered Agreement Structure

Instead of a single non-compete, use a multi-agreement approach tailored to role and access level:

All employees (regardless of trade secret access):

• Confidentiality and nondisclosure agreement covering proprietary information
• Assignment of inventions/work product clause
• Electronic systems acceptable use policy

Employees with trade secret access:

• Enhanced NDA with specific categories of protected trade secrets
• Non-solicitation of customers (if customer-facing role)
• Non-solicitation of employees (if management or team lead role)
• Acknowledgment of trade secret obligations under MUTSA

Key personnel (C-suite, technical leads, senior sales):

• All of the above, plus
• Garden leave provision (see below)
• Detailed exit procedures and cooperation obligations

Step 4: Implement Operational Protections

Agreements alone are insufficient. To qualify for protection, information must be “the subject of efforts that are reasonable under the circumstances to maintain its secrecy,” so courts evaluating a MUTSA claim examine whether you took reasonable security measures (Minn. Stat. § 325C.01, subd. 5). The non-compete ban makes these operational protections even more important because you can no longer rely on a contractual employment restriction as a backstop.

Reasonable secrecy efforts turn on all the circumstances, not on paperwork alone. A trade secret’s protection is not lost merely because someone acquired it without an express “this is confidential” label, so long as the circumstances make clear the owner expects secrecy (Minn. Stat. § 325C.01, subd. 5). That tempers over-reliance on labeling while still rewarding practical measures like:

• Role-based access controls limiting trade secret access to those who need it
• Exit interviews and equipment/data return procedures
• Access revocation protocols triggered immediately upon notice of departure
• Monitoring for unusual data access or downloads, especially during notice periods

Pre-Ban Non-Competes Still in Effect

If your company has non-competes signed before July 1, 2023, they remain enforceable, but managing them requires attention.

Track expiration dates. Most non-competes have defined durations (typically 12-24 months post-employment). Once an employee covered by a pre-ban non-compete leaves, track when the restriction expires.

Assess enforceability. Pre-ban non-competes are still subject to Minnesota’s reasonableness analysis. Courts examine whether the restriction is reasonable in scope, duration, and geographic reach. An overly broad non-compete may be reformed (narrowed) or voided even though it predates the ban.

Do not assume coverage. A pre-ban non-compete protects you only as long as the employee remains bound by it. Once the restriction period expires, your protection comes from NDAs, non-solicitation agreements, and trade secret law, so those protections need to be in place.

New agreements for existing employees. You can ask employees with pre-ban non-competes to sign updated NDA and non-solicitation agreements. For an existing at-will employee, a restrictive covenant added after work begins is enforceable only if supported by independent consideration, and continued employment alone may not be enough (National Recruiters, Inc. v. Cashman, 323 N.W.2d 736, 740-41 (Minn. 1982)). The rule is fact-specific: continued employment can supply adequate consideration when the employee also receives real advantages bargained for in exchange for signing, such as advancement or increased responsibility, while re-labeling pay, benefits, or training they already had does not count (National Recruiters, Inc. v. Cashman, 323 N.W.2d 736, 740-41 (Minn. 1982)). Note that a new non-compete is void regardless of consideration under Minn. Stat. § 181.988, so this consideration analysis now governs only the NDAs and non-solicitation agreements the statute leaves enforceable.

The Garden Leave Concept

Garden leave offers a partial substitute for non-competes. Under a garden leave provision, the employer continues to pay the employee for a period after notice of departure, during which the employee remains technically employed but is not required to work. During this period, the employee’s existing contractual obligations (confidentiality, non-solicitation) remain in effect.

How it works in practice:

• Employee gives notice of resignation
• Employer invokes the garden leave provision
• Employee remains on payroll for the specified period (typically 1-6 months)
• Employee has no work duties but remains bound by all employment obligations
• The employer uses this period to transition customer relationships, change access credentials, and update sensitive information

Advantages. Garden leave does not restrict the employee from working for a competitor after the leave period ends, so it avoids the non-compete ban. It does create a cooling-off period during which trade secrets may become stale and customer relationships can be transitioned.

Limitations. Garden leave costs money: you are paying someone not to work. It is practical only for employees whose trade secret access justifies the expense. It also requires advance planning; you cannot impose garden leave after the fact without a contractual basis.

Minnesota-specific considerations. Because garden leave restrains the employee only while employment continues rather than “after termination of the employment,” it does not meet the statutory definition of a covenant not to compete and should fall outside the scope of Minn. Stat. § 181.988, subd. 1(a). That is a textual inference, not a holding: no Minnesota court has yet tested a paid garden-leave arrangement against the statute, so employers should work with counsel to structure these provisions carefully and avoid drafting that reaches past the end of employment.

Practical Framework: Protecting Trade Secrets Without Non-Competes

Here is an integrated approach that replaces the non-compete with more targeted, more defensible protections.

Before Hiring

• Identify the trade secrets the role will access
• Draft role-appropriate agreements (NDA, non-solicitation, invention assignment)
• Establish access controls before the employee’s first day

During Employment

• Limit access to trade secrets on a need-to-know basis
• Mark confidential materials appropriately
• Conduct annual reminders of confidentiality obligations
• Monitor for policy compliance (not surveillance, reasonable monitoring)
• Update agreements when roles change or access expands

At Departure

• Conduct a thorough exit interview
• Collect all company property and devices
• Revoke all system access immediately
• Remind the employee of ongoing NDA and non-solicitation obligations in writing
• If garden leave applies, invoke it promptly
• Preserve access logs and any evidence of unusual pre-departure activity

After Departure

• Monitor public information for signs of trade secret use (new product announcements, customer shifts)
• If misappropriation is suspected, act quickly: MUTSA and DTSA provide injunctive relief, but delay weakens your position
• Maintain relationships with key customers to reduce solicitation risk

Frequently Asked Questions

Are all non-competes now unenforceable in Minnesota?

No. Non-competes signed before July 1, 2023, are unaffected, because the ban applies only to contracts and agreements entered into on or after that date (Minn. Stat. § 181.988, effective date). Non-competes agreed upon in connection with the sale of a business or the dissolution of a partnership, LLC, or corporation also remain permitted (Minn. Stat. § 181.988, subd. 2(b)).

Can I still prevent a former employee from soliciting my customers?

Yes. Non-solicitation agreements are explicitly excluded from the definition of a covenant not to compete, so they are unaffected by the non-compete ban (Minn. Stat. § 181.988, subd. 1(a)). You can restrict a former employee from soliciting customers they worked with during employment. The separate requirement that such a restriction be reasonable in scope and duration comes from Minnesota common law on restrictive covenants, not from the statute itself.

If I cannot use a non-compete, how do I stop a former employee from joining a direct competitor?

You generally cannot prevent an employee from working for a competitor. You can prohibit them from using or disclosing your trade secrets (through NDAs and trade secret law), soliciting your customers or employees (through non-solicitation agreements), and taking your proprietary materials (through employment agreements and trade secret statutes). If a role would make disclosure of your trade secrets a near-certainty, an inevitable-disclosure theory may offer a narrow backstop, but Minnesota courts have neither adopted nor rejected the doctrine and no party has ever actually obtained an injunction on that basis here, so it is uncertain ground (Katch, LLC v. Sweetser, 143 F. Supp. 3d 854 (D. Minn. 2015)).

Should I ask employees with pre-ban non-competes to sign new agreements?

Consider it seriously. Pre-ban non-competes have a limited shelf life: they protect you only for their stated duration after the employee leaves. Supplementing them with strong NDAs and non-solicitation agreements ensures you have enforceable protections once the non-compete expires. Be aware that new agreements for existing at-will employees may require independent consideration beyond continued employment (National Recruiters, Inc. v. Cashman, 323 N.W.2d 736, 740-41 (Minn. 1982)).

What is garden leave and should my company use it?

Garden leave is a paid notice period during which the employee does not work but remains on the payroll and bound by all employment obligations. It creates a cooling-off period without restricting future employment. It is most appropriate for senior employees with significant trade secret access whose departure poses meaningful risk. The cost (continuing salary during the leave period) should be weighed against the value of the trade secrets being protected.

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For guidance specific to your situation, contact Aaron Hall, attorney for business owners, at aaronhall.com or 612-466-0040.