Pending MN House Bill Threatens to Void Non-Competes:
MN Businesses Must Take Action
We encourage Minnesota businesses that have non-competition agreements with their employees to take action in response to pending legislation in the Minnesota House of Representatives that would likely void most current non-compete restrictions and certainly prohibit them in the future. If passed, the bill (H.F. No. 506) would ban non-compete clauses in employment agreements, dealing a serious blow to employers that need (and currently appreciate) the right to enforce reasonable restrictions on their employees' ability to leave and take the employer's valuable confidential information, trade secrets, and customer goodwill to a competitor.
Today's headlines confirm what we all know: trade secret theft is a real threat to the vitality of American business. Developing technology systems, customer goodwill, and other assets requires major investments of time and money. Non-compete covenants, with reasonable restrictions on length and scope, are key to deterring abuses and protecting business value.
The bill would also impair the value of Minnesota businesses, since it would seriously limit the ability of a buyer of a Minnesota business to prevent the seller from competing against the buyer after the sale. Among other problems, the legislation would limit the scope of non-compete provisions in an agreement to sell a business to a specific part of a city or county, ignoring the fact that much commerce is conducted on a national and global scale. Who would want to pay for the assets of a business, only to see the seller start competing in a neighboring state or county?
The sponsors of the bill are key legislators—Representative Joe Atkins (DFL, District 52B), Chair of the House Commerce Committee, and Representative Alice Hausman (DFL, District 66A), Chair of the Capital Investment Committee. It is uncertain that the bill will make it out of committee this year. However, communications from some individuals who believe non-compete clauses have been unfair to them evidently are influencing lawmakers and garnering interest in unfavorable non-compete legislation that will gain traction next year if not now.
We believe that lawmakers must know soon, and unambiguously, that Minnesota's business community strongly opposes these unwarranted new regulations of their vital interests. Reasonable non-compete restrictions that make employers successful and want to grow in this state are far more important for the thousands of great jobs that they provide than unwise legislation in response to a handful of complaints.
MN Businesses Take Action:
In the interest of our clients and the broad Minnesota business community, we feel it is important to stop the bill in committee, and we encourage all of you to take action by contacting Representatives Atkins and Hausman, your own Representatives and Senators, government relations representatives, trade associations, and the Chamber of Commerce to voice your opposition to the bill.
We Can Help.
If you would like more information about the bill or how you can help prevent it from becoming law, please contact Maslon partners Bill Pentelovitch, Jon Parritz, or Howard Tarkow.
Maslon's national Competitive Practices/Unfair Competition Group provides legal counseling and litigation services in the areas of non-compete agreement drafting and enforcement, as well as the full range of issues which arise in the competitive sphere, including antitrust, product disparagement, trade secrets, non-solicitation, as well as patent, trademark and copyright. If we can be of service, please contact any of the members of our team.