NDAs That Actually Hold Up: What Minnesota Courts Require

If your business has employees, contractors, vendors, or partners who access any confidential information—and nearly every business does—you need non-disclosure agreements. Not eventually. Now.

This isn’t just a legal formality. Since Minnesota’s non-compete ban took effect on July 1, 2023 (Minn. Stat. § 181.988), NDAs have moved from “one of several protections” to the primary contractual tool for safeguarding your confidential business information. The statute explicitly carves out non-disclosure agreements as enforceable. They are now your first line of defense.

Yet many Minnesota businesses either don’t use NDAs at all, use generic templates downloaded from the internet, or have NDAs so poorly drafted that they wouldn’t survive a legal challenge. Each of these scenarios leaves your business exposed.

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Why Every Business Needs NDAs—Not Just Tech Companies

There’s a persistent misconception that NDAs are only for technology companies protecting source code or pharmaceutical companies guarding formulas. The reality is that nearly every business has confidential information worth protecting:

Customer and client lists — who you do business with, their contact information, their buying patterns, their contract terms
Pricing strategies — your margins, discount structures, bid calculations, cost breakdowns
Financial information — revenue figures, profitability by service line, cash flow data
Business strategies — expansion plans, marketing approaches, competitive analyses
Vendor relationships — your supply chain, negotiated terms, sourcing methods
Operational processes — how you deliver your product or service, quality control methods, training programs
Employee information — compensation data, performance evaluations, staffing plans

If a competitor obtained any of this information, it would hurt your business. That means it deserves protection—and an NDA is the foundation of that protection.

Key Provisions Every NDA Should Include

A well-drafted NDA isn’t long, but it must be precise. Here are the provisions that matter most:

1. Definition of Confidential Information

This is the most important provision in the agreement—and the one most often done poorly.

What works: A definition that is both specific enough to be enforceable and broad enough to cover what you actually need to protect. The best approach combines a general definition with specific categories of information:

“Confidential Information means all non-public information disclosed by the Company, whether orally, in writing, electronically, or by observation, including but not limited to: customer lists and customer data; pricing information and financial data; business strategies and marketing plans; proprietary processes, methods, and techniques; software and technology; employee information; and any other information identified as confidential at the time of disclosure.”

What doesn’t work: Vague definitions like “all information shared during employment” (too broad to be meaningful) or definitions limited to information explicitly marked “Confidential” (excludes verbal disclosures and information shared informally).

2. Obligations of the Receiving Party

Clearly state what the recipient must do—and must not do—with confidential information:

Non-disclosure: The recipient must not disclose the information to anyone not authorized to receive it
Limited use: The recipient may use the information only for the purposes of their relationship with your company (employment, the project, the partnership)
Standard of care: The recipient must protect the information with at least the same degree of care they use for their own confidential information, and no less than reasonable care
Return or destruction: Upon termination of the relationship (or upon request), the recipient must return or destroy all confidential information and certify that they have done so

3. Exclusions from Confidential Information

Standard exclusions protect the recipient from unreasonable claims and make the NDA more enforceable:

Information that was already publicly available (not through the recipient’s breach)
Information the recipient already knew before receiving it from you
Information received from a third party who had the right to disclose it
Information independently developed by the recipient without use of your confidential information
Information required to be disclosed by law or court order (with prompt notice to you)

Including these exclusions actually strengthens your NDA. Courts view agreements with reasonable exclusions more favorably than those that attempt to restrict everything.

4. Duration of Obligations

For trade secrets: The obligation should last for as long as the information qualifies as a trade secret—which can be indefinite. Use language like: “The obligations regarding trade secrets shall continue for as long as such information constitutes a trade secret under applicable law.”

For other confidential information: A defined period—typically 2 to 5 years after the end of the relationship—is standard and generally enforceable. Courts are more skeptical of indefinite obligations for non-trade-secret information.

The practical approach: Use a two-tier structure. Trade secrets are protected indefinitely. Other confidential information is protected for a defined period (3-5 years is common in Minnesota).

5. Remedies

Specify that a breach of the NDA would cause irreparable harm that cannot be adequately compensated by money damages alone, and that you are entitled to seek injunctive relief (a court order stopping the breach) in addition to any other remedies available at law.

This language matters because courts typically require a showing of irreparable harm before granting an injunction. Including it in the NDA creates a contractual acknowledgment that strengthens your position if you need emergency court relief.

6. Choice of Law and Jurisdiction

Specify that Minnesota law governs the agreement and that disputes will be resolved in Minnesota courts. This is particularly important for agreements with out-of-state contractors or vendors.

Unilateral vs. Mutual NDAs: Which Do You Need?

Unilateral NDAs (one-way) protect only your confidential information. The other party agrees not to disclose what you share with them.

Mutual NDAs (two-way) protect both parties’ confidential information. Each party agrees to protect what the other shares.

When to Use Each

Unilateral NDAs are appropriate for:
– Employees (they receive your confidential information; you generally don’t receive theirs)
– Contractors performing work for you
– Vendors who access your systems or data as part of providing services

Mutual NDAs are appropriate for:
– Business partnerships and joint ventures
– Merger and acquisition discussions
– Strategic alliance negotiations
– Potential investor or buyer conversations
– Any relationship where both parties will share sensitive information

A common mistake: Using a mutual NDA when a unilateral one is appropriate. Mutual NDAs create obligations for both parties—including restrictions on what you can do with the other party’s information. Don’t take on obligations you don’t need.

NDAs by Relationship Type

Different relationships call for different NDA approaches:

Employees

When to sign: At the start of employment, as part of the onboarding package. Having employees sign an NDA mid-employment can raise consideration issues (under Minnesota law, continued employment alone may not constitute sufficient consideration for a new restrictive covenant—include additional consideration such as a bonus, promotion, or access to new information).

Key additions for employee NDAs:
– Invention assignment clause (or a separate invention assignment agreement) to ensure the company owns IP created during employment. Note: Under Minn. Stat. § 181.78, you cannot require assignment of inventions developed entirely on the employee’s own time without company resources, unless the invention relates to the company’s business or anticipated research/development.
– Post-employment obligations that clearly survive termination
– Acknowledgment that the employee will have access to trade secrets and confidential information

Independent Contractors

When to sign: Before any confidential information is shared—ideally as part of the independent contractor agreement or as a separate agreement executed simultaneously.

Key additions for contractor NDAs:
– Work product ownership clause (work-for-hire or assignment provisions)
– Subcontractor restrictions — the contractor should not be able to share your information with their subcontractors without your written consent
– Insurance/indemnification provisions appropriate to the scope of access

Vendors and Service Providers

When to sign: Before granting access to your systems, data, or facilities.

Key additions for vendor NDAs:
– Data protection requirements specifying security standards the vendor must maintain
– Breach notification requirements obligating the vendor to notify you promptly if a breach occurs
– Audit rights allowing you to verify the vendor’s compliance with confidentiality obligations
– Return/destruction certification upon termination of the relationship

Business Partners and Potential Acquirers

When to sign: Before substantive business discussions begin. Do not share sensitive information based on a handshake or a “gentleman’s agreement.”

Key additions:
– Purpose limitation — the information may only be used to evaluate the specific opportunity being discussed
– Standstill provisions if appropriate (particularly in M&A contexts)
– Non-solicitation of employees during and after discussions
– Residuals clause — consider whether to include a provision allowing the receiving party to use general knowledge retained in unaided memory (common in technology contexts)

Common NDA Mistakes That Make Them Unenforceable

Mistake 1: Defining Confidential Information Too Broadly

If your NDA defines confidential information as “all information, whether written, oral, or observed, of any kind whatsoever,” a court may find the definition so overbroad that it’s unenforceable. Be comprehensive but specific—list categories of information rather than claiming everything is confidential.

Mistake 2: No Consideration for Existing Employees

If you ask a current employee to sign an NDA without providing new consideration (beyond continued employment), the agreement may not be enforceable in Minnesota. Best practices: tie the NDA to a promotion, raise, bonus, grant of stock options, or access to a new category of confidential information.

Mistake 3: Unreasonable Duration

While trade secret obligations can be indefinite, non-trade-secret confidentiality obligations with no time limit may be viewed skeptically by courts. Use the two-tier approach: indefinite for trade secrets, 3-5 years for other confidential information.

Mistake 4: Failing to Carve Out Standard Exclusions

An NDA without standard exclusions (publicly available information, independently developed information, etc.) appears one-sided and may face enforcement challenges. Including fair exclusions actually makes your NDA stronger.

Mistake 5: No Injunctive Relief Provision

Without language acknowledging that breach would cause irreparable harm, getting emergency court relief to stop a breach becomes significantly harder. Include this provision—it could make the difference between stopping a disclosure in time and not.

Mistake 6: Using a Generic Template Without Customization

An NDA downloaded from the internet and used without modification often fails to address your specific situation—the types of information your business actually needs to protect, the relevant state law, the particular relationship, or the practical realities of your business. Generic agreements provide generic protection.

Mistake 7: Not Actually Enforcing the NDA

An NDA is only as strong as your willingness to enforce it. If employees routinely share confidential information without consequence, or if you know about breaches and do nothing, you undermine both the specific agreement and your broader trade secret protection. Courts consider whether you actually enforce your confidentiality measures when evaluating trade secret claims.

NDAs in the Post-Non-Compete-Ban Era

Minnesota’s non-compete ban (Minn. Stat. § 181.988) fundamentally changed the landscape for protecting business information. Before the ban, many employers relied on non-compete clauses as a catch-all—even if the real concern was protecting confidential information rather than preventing competition per se.

Now, with non-competes off the table for most employees, NDAs must do the heavy lifting. This creates both urgency and opportunity:

The urgency: If your NDAs are weak, generic, or nonexistent, you’ve lost your primary contractual protection for confidential information. The non-compete clause that served as a backstop is gone.

The opportunity: A well-drafted NDA, paired with a strong trade secret protection program, can be more effective than a non-compete clause in many situations. NDAs directly protect the information you care about, rather than broadly restricting where someone can work. Courts generally view NDAs more favorably than non-competes because they’re more narrowly tailored to a legitimate business interest.

What This Means Practically

Audit your existing NDAs. Are they comprehensive enough to stand on their own without a non-compete backstop? Do they clearly define what’s protected? Are they enforceable under current Minnesota law?
Implement NDAs for all new hires. Every employee who will access confidential information—which is most employees—should sign an NDA as part of onboarding.
Consider supplemental NDAs for existing employees. If key employees don’t have NDAs (or have weak ones), address this now—with appropriate additional consideration.
Pair NDAs with non-solicitation agreements. While you can’t prevent an employee from working for a competitor, you can prevent them from soliciting your clients, customers, or other employees. Non-solicitation agreements are explicitly permitted under § 181.988.
Build a trade secret protection program. NDAs are one component. You also need access controls, document management, employee training, exit procedures, and consistent enforcement. Under MUTSA (Minn. Stat. § 325C), “reasonable measures” to maintain secrecy are a prerequisite to trade secret protection.

Enforcement: Practical Tips

When a breach occurs—or you suspect one—the following steps will position you for effective enforcement:

Document everything. Keep records of what information was shared, when, with whom, and under what NDA. This documentation is essential for proving your claim.

Act promptly. Delay undermines your position. Courts may infer that the information wasn’t actually that important if you waited months to take action after learning of a breach.

Send a cease-and-desist letter. A clear, professional letter identifying the breach and demanding that it stop often resolves the situation without litigation. It also creates a record that the other party was on notice.

Preserve evidence. Issue a litigation hold to prevent routine destruction of relevant documents and communications. If the breach involves digital information, consider engaging a forensic specialist.

Evaluate your remedies. Under MUTSA (Minn. Stat. § 325C) and the DTSA (18 U.S.C. § 1836 et seq.), remedies can include injunctive relief, damages (including unjust enrichment), and attorney’s fees in cases of willful and malicious misappropriation. Assess what relief best serves your business interests—sometimes a negotiated resolution with strong non-use commitments is more valuable than protracted litigation.

Frequently Asked Questions

Are NDAs still enforceable in Minnesota after the non-compete ban?

Yes. Minnesota’s non-compete ban (Minn. Stat. § 181.988) explicitly exempts non-disclosure agreements from its restrictions. NDAs protecting confidential information and trade secrets remain fully enforceable. In fact, the legislature’s decision to carve out NDAs underscores their legitimacy as a business protection tool.

Can I require an existing employee to sign an NDA?

Yes, but you should provide additional consideration beyond continued employment. Under Minnesota law, new restrictive covenants for existing employees may require independent consideration—such as a bonus, raise, promotion, or access to new confidential information—to be enforceable. For new hires, the job itself serves as consideration.

How long should an NDA last?

For trade secrets, the confidentiality obligation should last as long as the information qualifies as a trade secret (potentially indefinitely). For other confidential information, 3 to 5 years after the end of the relationship is standard and generally enforceable. A two-tier structure covering both categories is the recommended approach.

What’s the difference between an NDA and a confidentiality clause in an employment agreement?

A standalone NDA is typically more detailed and comprehensive. It provides specific definitions, clear obligations, enumerated exclusions, and explicit remedies. A brief confidentiality clause buried in a multi-page employment agreement may be overlooked by the employee, harder to enforce in isolation, and insufficient in scope. Both approaches create legal obligations, but a standalone NDA is generally more effective.

What should I do if someone violates an NDA?

Act quickly. Document the breach, preserve evidence, and contact legal counsel. Depending on the severity, options range from a cease-and-desist letter to emergency court relief (temporary restraining order) to full litigation. Claims can be brought under the NDA itself (breach of contract), MUTSA (Minn. Stat. § 325C) for trade secret misappropriation, and the DTSA (18 U.S.C. § 1836 et seq.) for a federal cause of action. Delay weakens your position, so prompt action is important.

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