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SF3288 (Legislative Session 94 (2025-2026))

Additional circumstances provision under which a covenant not to compete is valid and enforceable

Related bill: HF1768

AI Generated Summary

Purpose of the Bill

The bill aims to define additional circumstances under which a "covenant not to compete," also known as a non-compete agreement, is valid and enforceable in Minnesota.

Main Provisions

  • Non-Compete Agreement Exceptions: The bill lays out specific conditions where a covenant not to compete can be considered valid:

    1. High-Compensation Employees: These agreements are enforceable for employees with a yearly compensation of $120,000 or more if their primary duties involve research, development, or handling confidential information or for employees earning $500,000 or more irrespective of their job duties.
    2. Business Sale: Non-compete agreements are enforceable if they are made during the sale of a business. They must be temporary, have geographical restrictions, and aim to prevent the seller from starting a similar business.
    3. Business Dissolution: These agreements are valid when they're set in anticipation of dissolving a business, with the restriction that certain parties agree not to start a competing business in the area where the original business operated.

  • Legal Protections and Remedies: The bill allows courts to award reasonable attorney fees to employees enforcing their rights under this section, in addition to other legal remedies.

Significant Changes to Existing Law

Prior to this amendment, non-compete clauses were generally considered void and unenforceable. This bill adds specific scenarios where they can be enforced, thus broadening the conditions under which such agreements can legally be applied.

Relevant Terms

  • Covenant not to compete
  • Non-compete agreement
  • High-compensation employees
  • Business sale
  • Business dissolution
  • Confidential information
  • Research and development
  • Injunctive relief
  • Attorney fees

Bill text versions

Actions

DateChamberWhereTypeNameCommittee Name
April 02, 2025SenateFloorActionIntroduction and first reading
April 02, 2025SenateFloorActionIntroduction and first reading
April 02, 2025SenateFloorActionReferred toLabor

Citations

 
[
  {
    "analysis": {
      "added": [
        "Adds conditions where covenants not to compete can be enforceable for certain high-salary employees and during the sale or dissolution of a business."
      ],
      "removed": [
        ""
      ],
      "summary": "This bill modifies the circumstances under which a covenant not to compete is considered valid and enforceable under section 181.988, subdivision 2.",
      "modified": [
        "Clarifies exceptions to the general rule that covenants not to compete are void and unenforceable."
      ]
    },
    "citation": "181.988",
    "subdivision": "subdivision 2"
  }
]

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