Minnesota Legislature Set to Ban Non-compete Clauses

May 18, 2023

Non-compete clauses are one step closer to being abolished in Minnesota thanks to action taken on May 16. 

On that date, the Minnesota Senate passed the omnibus Jobs, Economic Development, Labor and Industry conference report. One component of the bill prohibits employers from using covenants not to compete, or non-compete clauses, in employment contracts. The MMA supports this prohibition, having recently passed policy opposing the use of non-competes in all physician employment contracts. 

In its letter to the Senate Judiciary and Public Safety Committee in February, the MMA outlined concerns with non-compete clauses, specifically arguing that they restrict competition and interfere with the patient/physician relationship. 

“Many physicians are presented with a non-negotiable, non-compete provision within a prospective employment agreement, especially when new to practice,” said MMA President Will Nicholson, MD, in the letter. “This limits their options to practice if they ever look for new employment. In addition to preventing physicians from practicing within a certain geographic area for a specified time, these provisions can also prevent them from informing their existing patients that they are leaving and providing their new location.” 

There are some exceptions to the prohibition on non-complete clauses. The legislation allows non-compete agreements related to the sale of a business where the agreement prohibits the seller from carrying on a similar business within the same geographic area for a period of time. It also allows the prohibition of partners, members, or shareholders of a business from starting a similar business in the same geographic area for a period of time. 

Once the bill is signed by Gov. Tim Walz, Minnesota will become the 13th state to prohibit non-competes in contracts with few exceptions. The law becomes effective on July 1, 2023.