You have found the person you want to hire, and that person works for a competitor. You can make the hire; Minnesota law decides how much risk comes with it. Three questions set that risk: whether the candidate’s noncompete and other covenants still bind them under Minn. Stat. § 181.988, Minnesota’s 2023 noncompete ban; whether your company can be sued for interfering with those agreements; and whether what the candidate knows becomes your company’s liability under the Minnesota Uniform Trade Secrets Act (“MUTSA”). In my experience, a former employer that sues over a departed employee names the new employer too, because the new employer is usually the party able to pay. Hiring from a competitor is a Minnesota employment law question that is mostly settled before the start date.
How does Minnesota’s noncompete ban apply when you hire from a competitor?
For a candidate who lives and works in Minnesota, a noncompete entered into on or after July 1, 2023, is void under Minnesota’s ban unless it was agreed upon during the sale of a business or in anticipation of a business’s dissolution. A noncompete signed before that date falls outside the ban, which leaves agreements signed before July 1, 2023 to the older case law in the next section. The date on the signature page is the first fact to get.
Minn. Stat. § 181.988, subd. 2(a) provides that “Any covenant not to compete contained in a contract or agreement is void and unenforceable,” and the enacting law “applies to contracts and agreements entered into on or after” July 1, 2023 (2023 Minn. Laws ch. 53, art. 6, § 1). The exceptions cover a covenant “agreed upon during the sale of a business” or “agreed upon in anticipation of the dissolution of a business” (§ 181.988, subd. 2(b)). If the candidate re-signed or amended the agreement after July 1, 2023, which version controls becomes its own question.
The ban reaches a clause by what it does, not its label. § 181.988, subd. 1(a) covers an agreement restricting the employee, after the employment ends, from performing “work for another employer for a specified period of time,” “work in a specified geographical area,” or work for another employer “in a capacity that is similar to the employee’s work” for the employer that is party to the agreement.
A competitor based in another state may have picked its home state’s law or courts. For an agreement entered into on or after July 1, 2023, an employee who “primarily resides and works in Minnesota” may void a provision, required as a condition of employment, that sends a claim arising in Minnesota elsewhere for decision or strips away “the substantive protection of Minnesota law” for a controversy arising in Minnesota, and the dispute then stays in Minnesota under Minnesota law (§ 181.988, subd. 3). That rule “applies only to claims arising under this section,” so it may not reach a dispute over a nonsolicitation or confidentiality term. A candidate who lives and works in another state may be bound under that state’s law, and the ban’s text does not say how far it reaches outside Minnesota.
What makes a pre-2023 noncompete enforceable against your new hire?
For a candidate who lives and works in Minnesota, a noncompete signed before July 1, 2023, is judged under Minnesota case law unless it validly picks another state’s law. Minnesota case law looks on these agreements “with disfavor” and enforces one that serves “a legitimate employer interest” and is “not broader than necessary to protect this interest” (Kallok v. Medtronic, Inc., 573 N.W.2d 356 (Minn. 1998)). Minnesota courts generally honor a contract’s choice of another state’s law: in Softchoice, Inc. v. Schmidt, 763 N.W.2d 660 (Minn. Ct. App. 2009), the court applied Missouri law to one employee’s noncompete under a choice-of-law clause. A covenant that was not part of the original hiring also needs new consideration: “Where such a covenant is not ancillary to the initial oral employment contract, it can be sustained only if supported by independent consideration” (National Recruiters, Inc. v. Cashman, 323 N.W.2d 736 (Minn. 1982)). That court held invalid a noncompete the employees first saw after they had started work.
Those rules give you four questions to ask about the candidate’s agreement: when it was signed relative to the offer and the start date, what the candidate received for signing it, what the candidate did for the competitor, and how much the role you are offering overlaps that work.
An overbroad covenant is not necessarily unenforceable, because Minnesota courts can equitably modify one to a reasonable scope: in Davies & Davies Agency, Inc. v. Davies, 298 N.W.2d 127 (Minn. 1980), the Minnesota Supreme Court approved a trial court’s cut of a five-year, 50-mile restriction to bond sales in one county for one year, then narrowed it further to a bar on actively soliciting the agency’s clients. In Sysdyne Corp. v. Rousslang, 860 N.W.2d 347 (Minn. 2015), the hiring company’s attorney advised that the noncompete was overbroad as to the employee’s preexisting customers and the whole agreement unenforceable; the trial court instead enforced it except as to those clients and entered a $158,240 judgment against the employee. A noncompete covered by the 2023 ban is void, so there is nothing for a court to modify.
An enforceable covenant can keep the new hire out of your company: in Kallok, the district court barred the employee from working for the hiring company for one year, and the court of appeals affirmed that injunction.
What still restricts a competitor’s employee when the noncompete is void?
A void noncompete leaves the rest of the candidate’s agreement standing. Minnesota’s ban says a covenant not to compete “does not include a nondisclosure agreement” or “a nonsolicitation agreement,” and its voiding rule does not render “void or unenforceable any other provisions” in an agreement that contains a void noncompete (Minn. Stat. § 181.988, subds. 1(a) and 2(c)).
Falling outside the ban does not make those terms automatically enforceable; courts still ask whether a nonsolicitation clause is supported by consideration and reasonable in scope. For a salesperson, that clause is usually the restriction that matters: in Softchoice, Inc. v. Schmidt, 763 N.W.2d 660 (Minn. Ct. App. 2009), the court affirmed a temporary injunction keeping a branch manager who had moved to another company from soliciting clients he had served or come to know through his former job, and held that “the one-year duration of the non-solicitation period ordered by the district court was not unreasonable.” If you are hiring for a book of business, the nonsolicitation clause, read the way Minnesota courts treat nonsolicitation agreements, decides how much of that book can follow.
Even without an agreement, the candidate owes the current employer a duty of loyalty until the last day of work. “An employee has the right, therefore, while still employed, to prepare to enter into competition with her employer,” but the duty “prohibits her from soliciting the employer’s customers for herself, or from otherwise competing with her employer, while she is employed” (Rehabilitation Specialists, Inc. v. Koering, 404 N.W.2d 301 (Minn. Ct. App. 1987)). I suggest telling the candidate in writing not to contact those customers for your company before the resignation takes effect.
How does hiring a competitor’s employee expose your company to a tortious interference claim?
The former employer can sue your company for tortious interference with contract if it proves “(1) the existence of a contract; (2) the alleged wrongdoer’s knowledge of the contract; (3) intentional procurement of its breach; (4) without justification; and (5) damages” (Sysdyne Corp. v. Rousslang, 860 N.W.2d 347 (Minn. 2015)). The Minnesota Supreme Court has held that when a noncompete is valid and those elements are established, a third party’s interference with it “is a tort for which damages are recoverable” (Kallok v. Medtronic, Inc., 573 N.W.2d 356 (Minn. 1998)).
Knowledge came easily in Kallok: the hiring company “knew of the existence of Kallok’s noncompete agreements before it hired him” because the candidate had said he might be bound and its chief executive, a former executive of the competitor, assumed he was.
Offering a job, by itself, does not prove procurement: the former employer “must show more than the mere offering of a job” (National Recruiters, Inc. v. Cashman, 323 N.W.2d 736 (Minn. 1982)). In Kallok, more was shown. The hiring company’s officials “met with Kallok on numerous occasions and procured the breach of his noncompete agreements by offering him the vice president position that he eventually accepted.”
The damages can include the former employer’s legal bills against your new hire. Kallok upheld an award letting the former employer recover from the hiring company “the attorney fees and other expenses it incurred in enforcing its noncompete agreements with Kallok.” That holding covers a noncompete “deemed valid,” which a noncompete void under the 2023 ban is not, but the surviving nonsolicitation and confidentiality terms are still contracts, governed by the same five elements as other tortious interference claims in Minnesota.
How does relying on an attorney’s review protect a hiring company?
A hiring company that relies in good faith on outside counsel’s advice after a reasonable inquiry can defeat a tortious interference claim even when the advice turns out to be wrong. In Sysdyne Corp. v. Rousslang, 860 N.W.2d 347 (Minn. 2015), the Minnesota Supreme Court held that “the justification defense to tortious interference with contract may encompass reasonable reliance on advice of counsel.”
The defense is the hiring company’s to prove: “The burden of proving that interference with a contract was justified is on the defendant.” In Sysdyne, the hiring company sent its outside attorney the candidate’s employment agreement and original offer letter, told the attorney the candidate would do essentially the same work, and later produced billing records showing the review. The court likened it to advice-of-counsel defenses in other settings, which require that the defendant “fully disclosed all material facts to the attorney, received advice that his or her conduct was legal, and acted in good-faith reliance on that advice.” Because “the fact that legal advice was verbal and undocumented may be relevant to the reasonableness of the defendant’s reliance on the advice,” a written record of what the attorney reviewed and concluded is worth keeping.
The same defense failed in Kallok. The hiring company’s attorneys were not given copies of the agreements, and its chief executive told them the candidate had not worked in the relevant product area in the previous two years and had no access to confidential information during that time. The court held that the company “may not rely upon an infirm consultation with counsel and the resulting advice as a justification for its action.”
The defense answers only the claim against your company; the employee in Sysdyne still owed the $158,240 judgment on the contract.
How can a new hire’s knowledge create trade secret liability for your company?
Your company misappropriates a competitor’s trade secret under MUTSA when it discloses or uses the secret without the competitor’s express or implied consent and, “at the time of disclosure or use,” it “knew or had reason to know” that its knowledge came through someone who owed the competitor a duty to keep the secret or limit its use (Minn. Stat. § 325C.01, subd. 3). Acquiring a secret while knowing or having reason to know it was obtained by “improper means” also counts, and improper means include “breach or inducement of a breach of a duty to maintain secrecy” (§ 325C.01, subd. 2).
In my experience, trade secrets rarely leave in one dramatic theft. They leave on a work laptop nobody collected, through access nobody shut off, and in what a new employer is a little too eager to hear at the interview. Asking a candidate about a competitor’s pricing, customer terms, or product plans invites the inducement the statute names, so I suggest keeping interviews to the candidate’s own skills and track record.
MUTSA’s remedies run against your company as well as the employee: “Actual or threatened misappropriation may be enjoined” (Minn. Stat. § 325C.02), and damages can include “both the actual loss caused by misappropriation and the unjust enrichment caused by misappropriation that is not taken into account in computing actual loss” (Minn. Stat. § 325C.03). “If willful and malicious misappropriation exists,” a court may add exemplary damages of up to twice that award (§ 325C.03) and may award reasonable attorney fees to the prevailing party (Minn. Stat. § 325C.04).
The federal Defend Trade Secrets Act (“DTSA”) gives the former employer a parallel claim for a secret “related to a product or service used in, or intended for use in, interstate or foreign commerce” (18 U.S.C. § 1836(b)(1)), using the same knew-or-had-reason-to-know test (18 U.S.C. § 1839(5)). The DTSA adds a limit aimed at hiring: an injunction may not “prevent a person from entering into an employment relationship,” and conditions placed on that employment “shall be based on evidence of threatened misappropriation and not merely on the information the person knows” (18 U.S.C. § 1836(b)(3)(A)).
What should the offer letter and new-hire paperwork include?
The offer letter and onboarding papers do two jobs. They get the candidate’s written disclosure of every agreement with a restrictive covenant, with copies, and a written promise not to bring, use, or disclose the former employer’s confidential information. They also put your own confidentiality and nonsolicitation terms in front of the candidate before the candidate accepts.
The candidate’s promise matters because MUTSA turns on what your company “knew or had reason to know” (Minn. Stat. § 325C.01, subd. 3), and a signed statement that nothing came along, backed by the first-day steps below, is part of your record on that question. In my practice, the same documents also prove what a hiring company knew: an onboarding acknowledgment of the candidate’s noncompete becomes evidence of knowledge, so the inquiry behind it has to be a real one.
For a new hire who lives and works in Minnesota, a noncompete in the hire’s employment agreement with your company is void under Minn. Stat. § 181.988. Your protection then comes from confidentiality and nonsolicitation terms, what Minnesota employers use in place of a noncompete. I suggest putting those terms in the offer the candidate signs to accept. In National Recruiters (Minn. 1982), employees first saw the noncompete after starting work, and the court held it invalid “because it was unsupported by such additional independent consideration.” In Softchoice (Minn. Ct. App. 2009), a nonsolicitation agreement in a formal promotion offer was “supported by consideration” because the promotion took effect when the employee signed.
Any confidentiality agreement you use needs one federal addition. An employer “shall provide notice of the immunity set forth in this subsection in any contract or agreement with an employee that governs the use of a trade secret or other confidential information” (18 U.S.C. § 1833(b)(3)). A cross-reference to a policy document, given to the employee, that sets out the employer’s reporting policy for a suspected violation of law also satisfies that requirement. Without the notice, your company “may not be awarded exemplary damages or attorney fees” under the DTSA in a case against that employee.
How do you keep a former employer’s confidential information out of your business?
A documented separation between the new hire and the former employer’s information is your company’s evidence on MUTSA’s knowledge question: whether it knew or had reason to know it was using a competitor’s trade secret (Minn. Stat. § 325C.01, subd. 3). The separation means the new hire brings no files or devices from the old job, works only on your systems, and stays off work that would put the former employer’s secrets to use, with a written record of each step. In practice, it looks like this:
- Before the first day, the candidate gets a written instruction to return or leave behind every device, file, and account from the old job, and signs a confirmation on day one.
- The new hire works only on your equipment and accounts, with no personal cloud folders, phones, or email forwarding from the old job connected to your systems.
- Managers are told in writing not to ask for the competitor’s pricing, customer terms, or plans.
- For the first months, assignments that overlap the old job, especially accounts the hire handled for the competitor, get a second look.
- Someone keeps a dated log of each step.
The same habits count toward your own protection, because MUTSA protects only information that “is the subject of efforts that are reasonable under the circumstances to maintain its secrecy” (§ 325C.01, subd. 5), and the reasonable measures that protect your own trade secrets start with the same discipline.
How should you respond to a cease-and-desist letter from the new hire’s former employer?
A cease-and-desist letter puts your company on notice of the hire’s agreements, which supplies the knowledge element of an interference claim from that day forward. I suggest answering with facts you have checked: which provision the letter invokes, whether that provision is enforceable, and what your onboarding record shows, without conceding the claim or escalating it.
In my practice, I have seen the former employer’s letter go to both the new hire and the company, even over contact as small as a referral to a former coworker. The first question is which provision the letter invokes, because a poaching cease-and-desist letter can rest on a noncompete or on a clause barring the solicitation of employees, and the two reach different conduct. A reply promising not to interfere, while the hire stays in the same role, does not answer the letter: the employment is the conduct the letter calls interference.
What helps is a record and accurate assurances. I suggest preserving the recruiting file and onboarding papers, getting the agreement the letter relies on, testing it against the questions above, and offering only assurances your company can keep and document, such as confirming that the hire brought no files. A settlement figure in a demand letter is not a damages calculation. What the former employer can show it lost, what the agreement says about remedies and fees, and what the law adds against a hiring company set the real exposure. Those additions include the unjust enrichment, exemplary damages, and fee awards MUTSA allows, and the enforcement costs Kallok shifted to a hiring company that interfered with a valid agreement.
Overreaching carries a cost for the sender, too. Under MUTSA, a court may award reasonable attorney fees to the prevailing party if “a claim of misappropriation is made in bad faith” (Minn. Stat. § 325C.04), and the DTSA allows the same award, adding that bad faith “may be established by circumstantial evidence” (18 U.S.C. § 1836(b)(3)(D)). If the letter presses a noncompete the 2023 ban made void, the hire can seek fees as well: a court may award reasonable attorney fees to “an employee who is enforcing rights under this section” (Minn. Stat. § 181.988, subd. 2(d)).
Is it safer not to ask a candidate about noncompetes?
No. Minnesota does not treat a hiring company as justified when it had knowledge of facts that, followed by a reasonable inquiry, would have revealed the candidate’s agreements, and the former employer’s first letter supplies that knowledge anyway. Asking is also how you build a defense: the Minnesota Supreme Court has held that reasonable reliance on outside counsel’s advice, after a reasonable inquiry, can justify the interference; in that case, counsel reviewed the candidate’s actual agreement. I suggest asking early, getting copies, and keeping the record.
What if the candidate will not show us their agreements?
I suggest treating the refusal as information. Without the documents, your company cannot make the kind of inquiry that protected the hiring company in a 2015 Minnesota Supreme Court decision, where outside counsel reviewed the actual agreement and offer letter. In a 1998 decision, a hiring company whose attorneys were not given copies of the agreements lost that defense. Your realistic choices are to make the offer contingent on reviewing the agreements, to assume the broadest restriction the candidate could have signed and shape the role around it, or to pass on the hire.
Should we agree to cover the new hire's legal costs if the old employer sues?
Only with the cost in view. In a 2015 Minnesota Supreme Court decision, the hiring company defeated the interference claim, yet the court noted it was ultimately responsible for the employee’s $158,240 breach-of-contract judgment because it had agreed to cover his legal fees for the move. A promise to protect a recruit can move the recruit’s personal exposure onto your company. Minnesota law may move some of that exposure onto your company even without a promise, for an employee sued over work done in the job who acted in good faith (Minn. Stat. §§ 181.970, 302A.521, and 322C.0408). Whether it does turns partly on how your company is organized and what its governing documents say. If you make a promise, I suggest defining whether it covers defense costs, damages, or both, capping it, and conditioning it on the candidate’s truthful disclosure of every agreement.
What if the new hire brought files from the old job?
I suggest stopping any use of the material, keeping it untouched and separated from your systems, and arranging its return in writing rather than deleting it on your own, because the files may become evidence of what was taken and when. From the moment your company learns of the files, it has reason to know where they came from. Under Minn. Stat. § 325C.01, using a trade secret without consent, at a time when you know or have reason to know it came through someone who owed its owner a duty to keep it secret or limit its use, is misappropriation.
Can we hire several people from the same competitor at once?
You can, but each hire brings its own agreement, and a group move adds risk, most often from a clause barring the solicitation of coworkers. Nonsolicitation terms survive Minnesota’s noncompete ban, and a clause barring a former employee from recruiting coworkers can turn a referral from your earlier hire into a demand letter addressed to both the hire and your company. Offering a job, by itself, does not prove an interference claim; in a 1998 Minnesota Supreme Court case, the court found procurement in repeated meetings and an offer to a candidate the hiring company knew had noncompete agreements. I suggest recruiting each person through your own process.
Does the noncompete ban cover a competitor's independent contractor?
Yes, for a noncompete entered into on or after July 1, 2023, by a contractor who lives and works in Minnesota. Minn. Stat. § 181.988 defines employee to include independent contractors, so a covered noncompete in a contractor agreement is void unless it was agreed upon during the sale of a business or in anticipation of a business’s dissolution. The ban covers an individual contractor, and a contractor’s business entity only when the competitor required the individual to form it as a condition of being paid under the contractor agreement (Minn. Stat. § 181.988, subd. 1(d)); a contractor working through their own independent business may fall outside the ban. As with an employee, the contractor’s confidentiality and nonsolicitation terms remain in place, and trade secret law applies to what the contractor knows.
The risk in hiring from a competitor is mostly set before the first day: by the date on the candidate’s agreement, by the inquiry your company makes before the offer, and by the separation you keep between the hire’s old information and your business. For a candidate who lives and works in Minnesota, the state’s 2023 ban voids a noncompete signed since July 1, 2023, outside a business sale or dissolution. Nonsolicitation terms, confidentiality terms, and trade secret law still follow the person you hire. Hiring decisions like this one are a regular part of my employment law work for Minnesota employers. If you would like a second set of eyes on a candidate’s agreement before you make an offer, email me at [email protected] to start an intake and conflict check before sending the agreement or any other confidential documents.
