On February 22, 2022, the Minnesota legislature came one step closer to banning non-compete clauses under certain circumstances. On that date, the Minnesota House Labor, Industry, Veterans and Military Affairs Finance and Policy Committee passed HF999.
HF999 renders non-compete clauses in Minnesota void and unenforceable unless either of two circumstances are present: (1) upon termination, the employee earned an annual salary that is more than the median family income for a family of four in Minnesota (as determined by the most recent US Census Bureau data), or (2) the employer agrees to pay, on a pro-rata basis, fifty percent of the employee’s highest annual salary over the past two years for the duration that the employee is subject to the non-compete clause.
The bill is quite broad, nullifying non-compete clauses that involve prohibitions on (1) working for another employer for a specific period of time, (2) working in a specific geographical area, or (3) working for another employer in a capacity that is similar to the employee’s work for the company that is enforcing the agreement. The bill also provides for attorneys’ fees for an employee who successfully enforces their rights under the statute, and prohibits choice-of-law and choice-of-venue clauses requiring an employee who primarily lives and works in Minnesota to abide by another state’s law or litigate in another state.
Should the bill become law, Minnesota employers should not automatically jettison all non-compete provisions. Employees in high-tech industries, executive employees, or other high earners would likely fall into the bill’s income exclusion. The bill also does not affect provisions involving non-solicitation, non-disclosure, and trade secret protection. Furthermore, the bill provides a severance provision, so an employee cannot leverage an unenforceable non-compete clause to invalidate other lawful provisions of an employment agreement.
HF999 now goes to the House Judiciary Finance and Civil Law Committee. Its companion bill in the Senate, SF1629, is in the Senate Labor and Industry Policy Committee.
There is no guarantee that HF999 or its companion will become law, however. HF999 passed its committee on a strictly party-line vote, with Democrats supporting the bill and Republicans opposing. Democrats currently control the Minnesota House, but Republicans control the Senate. Thus, even if HF999 passes the Minnesota House, its prospects in the Senate are dim. We will continue to monitor the situation as it unfolds.