This week we are going to look at three new steps in what seems to be an accelerating march toward banning non-compete agreements across the country. Specifically, in their most recent legislative sessions, Minnesota, Missouri, and Nevada, each took action to limit non-compete agreements in some capacity.
Minnesota
On May 24, 2023, Minnesota Governor Tim Walz signed Omnibus Jobs Bill SF 3035, which introduces several noteworthy changes to Minnesota state law. Among the notable changes are a sweeping ban on non-compete agreements, a prohibition on mandatory employer-sponsored meetings, mandated statewide paid sick leave, and expanded protections for parental leave and pregnant employees.
One of the pivotal provisions of the bill is the ban on non-compete agreements, which will take effect on July 1, 2023. This ban applies to both employees and independent contractors, regardless of their income level. The bill defines non-compete agreements as those that limit an individual’s ability to work for another employer within a specific timeframe, geographical area, or in a capacity similar to their previous employment with the contracting employer. Furthermore, employers will not be able to include a Choice of Law provision favoring the laws of another state to circumvent the limitations set forth by the bill. However, there are two notable exceptions to this ban: non-compete agreements entered into during the sale of a business and those made in anticipation of the dissolution of a business.
Additionally, the bill distinguishes between non-compete agreements and other types of restrictive agreements. It explicitly states that non-disclosure agreements, agreements designed to safeguard trade secrets or confidential information, and non-solicitation agreements that restrict the use of client or contact lists or the solicitation of customers are excluded from the definition of a “covenant not to compete.”
Minnesota has now joined a small contingent of states that have put into place a near-total ban on non-compete provisions (other states include California and Oklahoma).
Missouri
Missouri recently passed a bill that includes last-minute amendments with potential implications for restrictive covenants commonly used in business transactions. The bill focused on “judicial proceedings,” awaits the governor’s signature as of May 30, 2023.
The bill aims to limit covenants between businesses and owners regarding post-relationship solicitation and interference with employees and customers. However, the bill’s lack of an explicit “owner” definition leaves room for interpretation.
If signed into law, the bill would take effect on August 28, 2023.
Nevada
In a recent development, the Nevada legislature has passed new legislation that could have significant implications for non-compete clauses in physician contracts. The bill, known as Assembly Bill 11 (AB 11), seeks to ban most non-compete covenants in physician agreements while imposing stricter regulations on the employment of physicians by hospitals and psychiatric facilities. Introduced in February 2023, AB 11 successfully cleared both the Senate and Assembly by May. However, Governor Joe Lombardo’s veto in June has left the future of AB 11 uncertain, adding a layer of unpredictability to the situation. Although the bill fell just short of a veto-proof majority, its potential impact is still worth examining. If AB 11 ultimately becomes law, it would bring about the following changes:
Section 7.8 of the bill makes the most significant alteration to the existing legal framework. It effectively prohibits nearly all non-competition covenants in physician contracts. According to the relevant text, any non-compete covenant that restricts healthcare providers employed by or contracted with a hospital in Nevada from rendering medical services at another medical facility or office during or after their employment or contractual term would be considered void. Notably, the provision covers both post-employment restrictions on competition and those that apply during the employment period.
Under the proposed law, such non-compete covenants would be unenforceable, irrespective of whether they meet Nevada’s existing criteria for enforcing such agreements. These criteria include: (1) the covenant must be supported by valuable consideration, (2) it must not impose restrictions that exceed what is necessary for the employer’s protection, (3) it must not unduly burden the employee, and (4) the restrictions must be reasonable considering the valuable consideration involved.
The fate of AB 11 remains uncertain, pending any potential override of the governor’s veto. If the bill were to become law, it would mark a significant shift in the landscape of physician contracts in Nevada, effectively limiting the use of non-compete clauses and placing stricter constraints on hospitals and psychiatric facilities seeking to employ physicians.
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About Harrison Oldham
Harrison grew up in Mansfield, Texas. He attended Texas A&M University for his bachelor’s degree, where he met his wonderful wife, Kelsey. After graduating magna cum laude from Texas A&M, he attended SMU Dedman School of Law, graduating with honors in 2012. Today, Harrison and his wife live in Dallas, Texas with their son, Teddy.
Since graduating from SMU Law, Harrison has worked exclusively in the field of business law. He has spent time in private practice and in-house, working with clients of every size; from single person startups to Fortune 250 companies. Today his practice focuses on serving the diverse needs of businesses and individuals throughout Texas. You can learn more about Harrison by visiting his website, at: http://
