When the Minnesota Legislature voided most new employee noncompetes in 2023, a lot of employers I talk to assumed their entire post-employment playbook had been torn up. It hadn’t. The ban in Minn. Stat. § 181.988 is narrower than the headlines suggested.
Several of the tools business owners actually care about, protecting trade secrets, protecting customer relationships, protecting investments in inventions, are still on the table. The question is whether your current agreements use them correctly, or whether they still rely on the one thing Minnesota took away. For broader context on how these agreements interact with day-to-day employment practices, see our Minnesota employment law overview.
What exactly does Minnesota’s noncompete ban cover?
The statute’s target is narrow and specific. Under § 181.988 subd. 2, “Any covenant not to compete contained in a contract or agreement is void and unenforceable.” Subdivision 1(a) defines the covered restriction as one that stops a former employee from working for another employer for a set time, in a set geographic area, or in a similar capacity. That is the agreement Minnesota killed for new employees, and it applies whether the worker is a W-2 employee or an independent contractor.
What the statute expressly does not reach is almost as important. The same subdivision carves out nondisclosure agreements, agreements designed to protect trade secrets or confidential information, nonsolicitation agreements, and agreements restricting use of client or contact lists or solicitation of customers. In my practice, roughly the same employer conversations that used to end with “so we need a two-year noncompete” now end with a layered package using those surviving tools. The package is usually more defensible in court, because the old noncompetes were often overbroad anyway.
Can I still use a noncompete in a business sale or owner buyout?
Yes. Subdivision 2 of § 181.988 preserves two carve-outs where a noncompete remains enforceable: one agreed to during the sale of a business (between buyer and selling owner), and one agreed to “upon or in anticipation of a dissolution” of a partnership, LLC, or corporation. The covered activity must be a similar business, within a reasonable geographic area, for a reasonable length of time.
The business-sale carve-out is where this matters most for growing Minnesota companies. Buyers will still insist on a noncompete from the seller, and that clause is fully enforceable under the statute. The trap I see is employers trying to dress up an ordinary employment restriction as a “sale” clause when the employee is merely receiving equity or a retention bonus. Courts look at substance. If the restriction is functionally tied to employment rather than to the transfer of goodwill, it falls back under the general ban.
For dissolution-anticipation clauses, the practical use is founder buy-sell agreements and LLC operating agreements: a departing member can be restricted from standing up a competing venture in the same space for a reasonable period. This is doctrinally distinct from an employment noncompete and survives the 2023 ban.
How do confidentiality and NDA agreements fit into the replacement strategy?
A properly drafted nondisclosure agreement (“NDA”) or confidentiality clause is the foundation of any post-ban retention package. The statute expressly excludes these from the definition of a covered noncompete, so you retain full freedom to define confidential information, require return of materials at separation, and enforce through injunction and damages.
What the NDA cannot do is function as a de facto noncompete. If the “confidential information” is defined so broadly that any work in the industry would inevitably require its use, a court can refuse to enforce it as an end-run around § 181.988. I defend these challenges regularly, and the single best predictor of enforceability is narrow, specific category definitions (customer pricing, internal margin data, unreleased product specifications) rather than catch-all language like “all information the employee learns.”
What about nonsolicitation of customers and employees?
Customer and employee nonsolicitation agreements are both carved out of the ban and remain available. The customer-nonsolicitation clause is the closest functional substitute for the old noncompete: you cannot block the employee from working for a competitor, but you can block them from calling your customers.
Two drafting points matter:
| Clause type | What it can do | What it cannot do |
|---|---|---|
| Customer nonsolicit | Bar contact with customers the employee actually serviced or learned about during employment, for a reasonable period | Bar contact with customers the employee never touched, or define “customer” so broadly it covers the market |
| Employee nonsolicit (anti-raid) | Bar the departing employee from recruiting coworkers to a new employer | Bar a third-party customer from hiring your employees on its own initiative (that would hit § 181.9881) |
The aggressive scope drafters used under the old noncompete regime tends not to survive when repurposed into a nonsolicit. Courts read these against the 2023 policy backdrop.
Can my staffing or service-contract template still include a “no-hire” clause?
No, and this is the rule most employers miss. Minn. Stat. § 181.9881 voids service-provider contract clauses that try to restrict a customer from soliciting or hiring the provider’s employees. The statute’s words are unusually blunt: “No service provider may restrict, restrain, or prohibit in any way a customer from directly or indirectly soliciting or hiring an employee of a service provider.”
This reaches staffing agencies, consulting firms, outsourced IT, cleaning services, managed-service providers, and similar arrangements. If your master services agreement still contains a “client agrees not to hire contractor’s personnel for 12 months” clause, that clause is void, and the statute further requires you to notify affected employees that the clause is unenforceable against them. There is a narrow exemption for computer-software consulting placements where the worker is seeking eventual permanent employment with the customer, but that carve-out is tight and does not rescue most service-provider templates.
In my experience auditing post-2023 handbooks and contract libraries, this is the single most common surviving violation. Noncompetes were the headline; the no-hire clause is the one still quietly baked into older templates.
How do I protect trade secrets under MUTSA?
The Minnesota Uniform Trade Secrets Act (“MUTSA”), Minn. Stat. § 325C.01 et seq., is the statutory remedy when a departing employee takes something of competitive value, whether you have an NDA or not. The Act defines a trade secret as information that “derives independent economic value, actual or potential, from not being generally known” and “is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”
Both halves of that definition matter equally. Independent economic value is usually the easier half: a customer list with pricing history, a proprietary process, a margin model, a list of supplier contacts. Reasonable secrecy efforts are where cases are won and lost. If you left the file on a shared drive with no access controls, emailed it externally without marking it confidential, and had no trade-secret policy in your handbook, the court is unlikely to find you maintained reasonable secrecy.
The remedies are meaningful. Under Minn. Stat. § 325C.03, a complainant may recover actual loss, unjust enrichment, or a reasonable royalty. When willful and malicious misappropriation is proved, the court may award exemplary damages up to twice the compensatory award. Injunctive relief under Minn. Stat. § 325C.02 is available against actual or threatened misappropriation. In practice, the injunction is usually the relief that actually protects the business; damages follow later.
Can I require invention-assignment agreements from employees?
Yes, with one important Minnesota-specific limit. Invention-assignment clauses, where the employee agrees that inventions made during employment belong to the company, are enforceable, but Minn. Stat. § 181.78 voids any clause that tries to capture inventions developed (1) entirely on the employee’s own time, (2) without using the employer’s equipment, supplies, facilities, or trade-secret information, and (3) that neither relate to the employer’s business or anticipated R&D nor result from work performed for the employer. An assignment clause that overreaches into those personal-time inventions is unenforceable to that extent.
The statute also requires written notice to the employee that the assignment does not apply to such personal inventions. If your template does not include this notice, the agreement can still work, but you lose a procedural defense and invite a fight. A short Minnesota-specific notice paragraph fixes this. Most national templates I audit do not include it.
What does a post-ban retention package actually look like?
The practical replacement for the old noncompete is a stacked set of narrower, clause-specific protections. Each one addresses a different risk, and together they cover most of what the old one-page noncompete tried to do:
- Confidentiality / NDA. Narrowly defined categories of confidential information; return-of-materials obligation; survival after separation.
- Customer nonsolicitation. Limited to customers the employee actually serviced or about whom the employee learned confidential information; reasonable time period; no no-poaching language that would hit § 181.9881.
- Employee nonsolicitation (anti-raid). Bars the departing employee from recruiting coworkers, not customers from hiring.
- Trade-secret policy and controls. Documented access controls, confidentiality markings, and a handbook policy. This is the “reasonable efforts” prong of MUTSA.
- Invention assignment with § 181.78 notice. Captures work-related inventions; includes the required statutory notice carve-out.
- Minnesota choice-of-law and forum. Because § 181.988 subd. 3 voids contrary clauses for Minnesota-primary employees and lets them recover fees for enforcing that right, national templates should either conform for MN employees or carry an explicit MN rider.
The recurring pattern I see is that companies update the noncompete clause itself but leave the rest of the handbook and contract library untouched. That is the gap where post-ban disputes actually land.
Are any existing noncompetes still enforceable in Minnesota?
Agreements signed before July 1, 2023, are not void under the statute and may still be enforced under prior common-law reasonableness rules. The 2023 ban applies prospectively. An older agreement is not self-executing, though, and courts still test it against the older reasonableness standard, which in my practice often knocks out overbroad scope.
How should a multi-state employer draft a Minnesota choice-of-law and venue rider?
For employees who primarily live and work in Minnesota, the safer path is a carve-out rider that expressly applies Minnesota law and a Minnesota forum to those employees, rather than relying on the national template’s default state. The rider should also acknowledge that the employee may recover attorney fees for enforcing the rights the statute protects. Attempting to sidestep this with a blanket out-of-state clause is what triggers the voidability remedy.
Does Minnesota's noncompete ban treat physicians or other licensed professionals differently?
The § 181.988 ban applies across industries and does not carve out physicians, dentists, veterinarians, or other licensed professionals as a category, so most new employment-based noncompetes for those workers are void the same way they would be for any other employee. The business-sale and dissolution carve-outs still apply, so a physician selling a practice to a buyer can still sign an enforceable noncompete tied to the sale. Any older physician-specific rules that circulated before 2023 are superseded for new agreements.
What if a pre-July-2023 noncompete is overbroad: can a Minnesota court reform it down to a reasonable scope?
Minnesota has historically allowed some judicial “blue-penciling” of overbroad noncompetes under the old common-law reasonableness test, but courts have never been obligated to rewrite a clause to save it. In my practice, the willingness to blue-pencil has trended downward against the 2023 policy backdrop, and employers should not assume a court will shrink an overreaching pre-ban clause rather than simply decline to enforce it.
If a former employee takes documents on the way out, can I get emergency relief without a noncompete?
Often yes, through the Minnesota Uniform Trade Secrets Act and breach-of-NDA theories. Temporary restraining orders and preliminary injunctions under Minn. Stat. § 325C.02 are the workhorse remedies when a departing employee copies customer lists, pricing files, or proprietary processes. The practical limit is the reasonable-secrecy prong: access controls, confidentiality markings, and a handbook trade-secret policy are what make the emergency motion winnable.
What if the employee signed in another state with a choice-of-law clause?
Subdivision 3 of the noncompete statute blocks enforcement of out-of-state forum-selection and choice-of-law clauses against Minnesota-primary employees. The employee can void the clause, litigate in Minnesota, and recover attorney fees for enforcing that right. Multi-state employers often miss this when they use a single national template.
Closing thought
The 2023 ban closed one door and left several others open. Most of the real post-employment protection Minnesota employers want, keeping customers from being poached, keeping confidential information from walking out, keeping inventions and processes in the company, is still available through tools the statute expressly preserved.
The practical work is replacing a single overbroad clause with a stacked set of narrower ones, then cleaning up the service-provider contracts and handbook language that still carry pre-2023 assumptions. For more on how these pieces fit together across the broader pillar, see our Minnesota employment law overview. If you’d like a second set of eyes on your current template or a specific departure situation, email [email protected] with a brief description and any relevant documents.
