Legislation to Ban Non-compete Clauses Moving at Capitol

March 16, 2023

Companion bills prohibiting employers’ use of non-compete clauses in employment contracts are moving through both the House and Senate, with the latest Senate version passing the Judiciary and Public Safety Committee on March 15.  

SF405 (Mann, DFL – Bloomington) would render these kinds of non-compete clauses unenforceable for all employees, regardless of the type of job or the income of the employee.  The committee adopted an amendment to clarify that a prohibition on non-compete clauses does not prohibit the use of non-disclosure agreements, non-solicitation agreements, or efforts to protect trade secrets. It passed the committee and was referred to the Senate Finance Committee. 

The MMA shared a letter of support of SF405, arguing that “non-compete provisions in physician contracts restrict competition and interfere with the patient/physician relationship.” The letter goes on to state “employers argue that without non-competes, they will be at a significant financial loss when they invest in recruiting a physician, only to see that physician leave. There is nothing in this bill that prohibits an employer from recouping recruitment costs through other provisions in their employment contract. There are other, more positive, ways employers can encourage employees to stay.” 

The House companion, HF295 (Elkins, DFL – Bloomington), currently limits the prohibition to low-income workers by applying it to workers with incomes that are less than the medium family income for a family of four in Minnesota. HF295 passed the House Commerce Committee on March 8 and will be heard in the House Judiciary Finance and Civil Law Committee next. The House version would not apply to most physician contracts. 

If both bills pass in their current form, the bills will need to go to a conference committee to reach agreement on the final language.