Minnesota has made a significant shift in employment law, setting a potential trend for labor rights across the nation. On May 24, Gov. Tim Walz signed a transformative bill that outlaws non-compete agreements, with the new statute due to come into effect on July 1, 2023.
The legislation covers both employment and certain independent contractor agreements, curtailing post-termination restrictions that have historically limited employees’ rights to work for another employer for a specified period, within a certain geographic area, or in a capacity similar to their current role. It’s a move that advocates say will promote freedom and mobility in the workforce.
The law lays out a clear definition of independent contractors covered under this regulation. It focuses on individuals who operate contracts under their individual names or under entities they’ve formed themselves, particularly those who do not receive payments reported to the Internal Revenue Service via a W-2 form.
Another significant provision curbs the power of employers to enforce out-of-state arbitration or legal proceedings. Employers can no longer make such conditions of employment for those who primarily live and work within Minnesota.
However, not all forms of restrictive agreements are eradicated. The law continues to uphold agreements tied to the sale or dissolution of a business, agreements designed to protect trade secrets or confidential information, and non-solicitation agreements that limit the use of client lists.
With the introduction of this law, businesses in Minnesota are advised by Minnesota lawyers to review and possibly revise their employment and restrictive covenant agreements. The goal is to ensure compliance with the new legislation, while still maintaining protection over their business interests.
Minnesota’s move sends a clear signal to other states about the potential reshaping of employment law to favor worker mobility and freedom. The bill marks a departure from traditional labor constraints and could spur similar legislative changes across the country, as lawmakers balance the interests of businesses and employees in the rapidly evolving world of work.
The full impact of this law remains to be seen. However, it undoubtedly represents a bold stride towards boosting competition in the labor market.
