For decades, Minnesota employers relied on a familiar playbook: hire a key employee, have them sign a non-compete, and count on that agreement to keep proprietary information from walking out the door. That playbook changed fundamentally on July 1, 2023, when Minnesota’s non-compete ban (Minn. Stat. § 181.988) took effect.
The ban doesn’t mean employers are defenseless. But it does mean the strategies for protecting trade secrets must be redesigned from the ground up. Business owners who understand what changed—and what tools remain—can build protections that are actually stronger than the old non-compete approach.
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 et seq.), 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 can’t 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, examining scope, duration, and geographic reach. Many agreements that looked strong on paper were narrowed or voided in court.
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 after July 1, 2023, with limited exceptions. The key provisions:
Broad scope. The ban applies to any agreement that “restricts the employee from working for the employee’s next employer” after termination—regardless of how the agreement is labeled.
Limited exceptions. Non-competes remain enforceable in two narrow situations:
– During the sale of a business (protecting the buyer’s purchased goodwill)
– During the dissolution or disassociation from a partnership or LLC
No retroactivity. Non-competes signed before July 1, 2023, remain enforceable according to their original terms, subject to the same reasonableness analysis courts have always applied.
Choice of law. The statute applies to employees who reside and work in Minnesota, regardless of what state’s law the agreement selects. An employer can’t circumvent the ban by choosing Delaware or Texas law in the agreement.
What’s not banned. The statute explicitly does not restrict non-solicitation agreements, nondisclosure agreements, or other restrictive covenants that don’t prevent someone from working for a competitor.
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 fully enforceable in Minnesota. A well-drafted NDA prohibits the use or disclosure of confidential information and trade secrets, regardless of where the former employee works.
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 can’t 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.
– 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 solicitation of customers or employees remain enforceable. These address a specific risk—that a departing employee will use relationships and knowledge developed on the job to divert business or recruit colleagues.
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 (MUTSA) and federal (DTSA)—provide legal claims against anyone who misappropriates trade secrets, regardless of whether they signed any agreement at all. These statutes offer:
- Injunctive relief. Courts can order the return of trade secret materials and prohibit their use.
- Damages. Including actual damages, unjust enrichment, and in cases of willful misappropriation, exemplary damages up to twice the actual damages.
- Attorney’s fees. Available in cases of willful and malicious misappropriation.
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 has recognized a limited version of the inevitable disclosure doctrine, which allows courts to enjoin a former employee from working in a role where they would inevitably use or disclose trade secrets—even without a non-compete agreement.
This doctrine is narrow and courts apply it cautiously, but it demonstrates that trade secret law provides some of the same protections non-competes offered, without requiring a contractual restriction on employment.
How to Restructure Employee Agreements Post-Ban
The non-compete ban requires employers to rethink their entire approach to employee agreements. Here’s 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 after July 1, 2023 (void—replace immediately)
– NDAs and non-solicitation agreements (assess whether they’re strong enough to carry the protective load without a non-compete backstop)
Step 2: Identify What You’re 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. Courts evaluating MUTSA claims look at whether you implemented practical security measures. 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.
Essential operational measures include:
– 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.
Don’t 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. Be aware that additional consideration may be required for existing at-will employees to make new restrictive covenants enforceable—continued employment alone may not suffice under Minnesota law.
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 doesn’t 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’re paying someone not to work. It’s practical only for employees whose trade secret access justifies the expense. It also requires advance planning; you can’t impose garden leave after the fact without a contractual basis.
Minnesota-specific considerations. Because garden leave is not a “covenant not to compete” (the employee remains employed and compensated), it should fall outside the scope of § 181.988. However, this is a relatively new area in Minnesota, and employers should work with counsel to structure garden leave provisions carefully.
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, remain enforceable according to their terms, subject to the same court reasonableness analysis that has always applied. The ban applies only to agreements entered into on or after that date. Additionally, non-competes in connection with the sale of a business or dissolution of a partnership or LLC remain permitted.
Can I still prevent a former employee from soliciting my customers?
Yes. Non-solicitation agreements are explicitly not affected by the non-compete ban. You can restrict former employees from soliciting customers they worked with during employment, provided the restriction is reasonable in scope and duration.
If I can’t 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. However, 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 the employee would inevitably disclose your trade secrets in a particular role, the inevitable disclosure doctrine may provide additional protection—though courts apply it cautiously.
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 employees may require additional consideration beyond continued employment.
What is garden leave and should my company use it?
Garden leave is a paid notice period during which the employee doesn’t work but remains on the payroll and bound by all employment obligations. It creates a cooling-off period without restricting future employment. It’s 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.
Related Articles
- Trade Secrets: Overview and Legal Framework
- Protecting Your IP When Employees Leave: The Minnesota Employer’s Guide
- NDAs That Actually Hold Up: What Minnesota Courts Require
- Does Your Business Actually Protect Its Trade Secrets? How to Find Out
For guidance specific to your situation, contact Aaron Hall, attorney for business owners, at aaronhall.com or 612-466-0040.