On May 16, 2023, a significant shift impacted the business landscape throughout Minnesota. Governor Tim Walz signed a bill into law that effectively banned non-compete agreements within employment contracts. Previously, businesses utilized non-compete agreements to safeguard their trade secrets and other confidential information. Essentially, they restricted an employee’s ability to compete with the employer’s business during and after the employment relationship. This new legislation raises essential questions about how businesses can adapt and protect their trade secrets and customer relationships while also preserving their market share.
The Impact of the Ban
This newly enacted law in Minnesota significantly departs from what businesses have adopted as standard practices. Because of this new legislation, non-compete agreements have become unenforceable with certain exceptions. First, if a non-compete is entered into as part of a business sale, it remains valid and enforceable. Conversely, when a non-compete is entered into as a business is being dissolved, the ban on them is not a factor. Also, these restrictions apply only to agreements signed on or after July 1, 2023, and will not apply retroactively.
Otherwise, employees who have signed non-compete agreements can work for competitors. These agreements will no longer bind employees if they leave their jobs. Though that applies to your employees, it also extends to other businesses. You may be able to attract talent that was previously barred from working with you.
These agreements were tools businesses used to safeguard their trade secrets and other confidential information. Because that tool is no longer an option, they will be forced to use and develop other strategies to achieve that.
Options for Moving Forward
While Minnesota no longer allows non-compete agreements (except in the scenarios outlined above), businesses can still utilize non-disclosure agreements. NDAs are contracts that protect confidential information that is shared, and by having them, you are restricting a person’s ability to disclose that information to others. Unlike a non-compete agreement, NDAs are designed to preserve confidentiality instead of preventing an employee from working with a competitor. They give a business the option for legal recourse in case of a breach.
Another element to consider is reinforcing or redesigning your policies regarding which employees have access to the property and resources you intend to protect. Look at your data security positions and re-evaluate who can use sensitive information. By examining what powers you still retain, you will realize that you can mitigate potential risks by properly handling confidential information.
To add to what we just referenced, make a renewed commitment to educating and training your employees. This is one way to ensure they have a fundamental appreciation for protecting trade secrets and intellectual property. Though not all your employees can use restricted information, you can create a culture of awareness and responsibility.
Quantum Lex Will Support & Guide You
At first, the ban on non-compete agreements may seem daunting, but we want to stress that you still have several avenues to protect your most valuable assets. Quantum Lex is accustomed to developing innovative solutions that help businesses navigate the legal complexities surrounding safeguarding confidential information. We are here to deliver tailored advice to support those impacted by this new legislation. We have a command over the challenges you may face because of it, and we can assist you with adapting your business strategies accordingly. Contact Quantum Lex to schedule a consultation to learn how we can help you develop strategies that align with the ban on non-compete agreements.
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