Minnesota Non-Compete Agreement Template

A Minnesota non-compete is not enforceable for:

• Employees
• Independent contractors
• Attorneys

The law does not void agreements entered into before July 1, 2023.

A Minnesota non-compete is enforceable in the context of:

• The sale of a business
• The dissolution of a business

A non-compete agreement made with an employee after July 1, 2023 is unenforceable. A non-compete clause in a contract, while void and unenforceable, does not render the whole contract null and void.^[3]

Any covenant not to compete contained in a contract or agreement is void and unenforceable.^[2]

Independent contractors, defined as individuals whose compensation is not reported to the IRS on a W-2, are likewise ineligible to enter into non-compete agreements. Independent contractors, per Minnesota statute, can include corporations, limited liability corporations, partnerships, or other corporate entities formed for the purpose of getting paid under a contract.^[4]

While attorneys can be considered either employees or independent contractors, there is a specific law restricting them from entering into an agreement limiting their right to practice upon the conclusion of a job or agreement.

A lawyer shall not participate in offering or making: (a) a partnership, shareholder, operating, employment, or other similar type of agreement that restricts the right of a lawyer to practice after termination of the relationship, except an agreement concerning benefits upon retirement; or (b) an agreement in which a restriction on the lawyer’s right to practice is part of the settlement of a client controversy.^[5]

A non-compete is enforceable if the seller and buyer of a business agree to its terms as part of a sale. The buyer, seller, and any partners or shareholders can agree that, for a limited time and within a limited area, the seller won’t engage in similar activities as the business being sold.

[A] covenant not to compete is valid and enforceable if the covenant not to compete is agreed upon during the sale of a business. The person selling the business and the partners, members, or shareholders, and the buyer of the business may agree on a temporary and geographically restricted covenant not to compete that will prohibit the seller of the business from carrying on a similar business within a reasonable geographic area and for a reasonable length of time.^[6]

A non-compete is enforceable if business partners, members, or shareholders agree, in anticipation of the dissolution of a partnership, company, or corporation, not to start a similar business in the same area where the business operated for a specified period of time.

A covenant not to compete is valid and enforceable if the covenant not to compete is agreed upon in anticipation of the dissolution of a business. The partners, members, or shareholders, upon or in anticipation of a dissolution of a partnership, limited liability company, or corporation may agree that all or any number of the parties will not carry on a similar business within a reasonable geographic area where the business has been transacted.^[7]

If an employer attempts to enforce a non-compete agreement against an employee and the employee takes the employer to court, the court is within its rights to make the employer cover the employee’s attorney fees.^[8]

Minnesota courts evaluate the reasonableness of a non-compete agreement on a case-by-case basis. There is no maximum term for a non-compete entered into within the context of the sale or dissolution of a business, but courts generally aim to enforce agreements that protect buyers without imposing undue hardship on sellers. Durations of one to two years are commonly considered reasonable, but courts have also upheld agreements that limited a seller’s right to compete for 10 years.^[9]