Minnesota voided noncompetes — but not the three agreements people confuse with them

By David J.S. Madgett

Minnesota attorney, license no. 390494 · Published August 7, 2026

Minnesota did something most states have only talked about. Under Minn. Stat. § 181.988, subd. 2(a):

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

Not “unenforceable if unreasonable.” Not “narrowed by a court to what is reasonable.” Void.

For a new employer this cuts two ways, and founders tend to notice only the half that hurts.

What counts as a noncompete

Subdivision 1(a) defines the term as an agreement between an employee and employer that restricts the employee, after termination, from performing:

1. work for another employer for a specified period of time;
2. work in a specified geographical area; or
3. work for another employer in a capacity similar to the employee’s work for the employer that is party to the agreement.

What is expressly not a noncompete

This is the part that gets misread, usually by someone who has concluded they have no protection at all. The statute expressly carves out:

• nondisclosure agreements, and agreements “designed to protect trade secrets or confidential information”; and
• nonsolicitation agreements, and agreements “restricting the ability to use client or contact lists, or solicit customers of the employer.”

So the tools that actually protect a small business survive intact. You can still stop a departing employee from walking out with your customer list, your pricing, your process documentation, or your source code. You can still stop them from calling your customers. What you cannot do is stop them from going to work for a competitor.

That is a narrower loss than it feels like. Most of what a founder actually fears — the employee who leaves and takes the book of business with them — is a nonsolicitation and trade secret problem, and both are still available.

The two exceptions

Subdivision 2(b) preserves noncompetes in two settings, neither of them employment:

Sale of a business. A covenant “agreed upon during the sale of a business” remains enforceable if it is temporary, geographically restricted, and prohibits the seller from carrying on a similar business “within a reasonable geographic area and for a reasonable length of time.” If you are buying a Minnesota business, you can still buy its owner’s agreement not to reopen across the street.

Dissolution of a business. A covenant agreed upon “in anticipation of the dissolution of a business” is likewise preserved on reasonable terms.

The provision out-of-state employers keep tripping over

Subdivision 3 is not about noncompetes at all, and it is the one that surprises people. An employer may not require an employee who primarily resides and works in Minnesota, as a condition of employment, to agree to adjudicate outside Minnesota or to waive the substantive protection of Minnesota law for a claim arising in Minnesota. A provision that violates this is voidable by the employee, and a court may award attorney fees.

If you are a Delaware or California parent hiring a Minnesota employee and your standard agreement picks your home state’s law and courts, that clause is not doing what your template assumes.

Remedies

Subdivision 2(d) allows a court to award an employee “reasonable attorney fees” in addition to injunctive relief and other available remedies. That changes the economics considerably. Presenting an employee with a void noncompete is not a free option — it can end with you paying for their lawyer.

What to actually do

• Take the noncompete out of your employment template. It is void, and keeping it in creates fee exposure while providing nothing.
• Put real effort into the nondisclosure and nonsolicitation clauses instead. Those survive, and they are what you needed.
• Fix your choice-of-law and venue clauses for anyone working in Minnesota.
• Keep noncompetes in your purchase agreements when you buy a business. That exception is intact and it matters.

One thing this article does not resolve: the statute as published does not itself carry language stating whether it reaches agreements signed before it took effect in 2023. If you are holding an older agreement and the answer matters to your decision, that is a question to put to a lawyer with the actual document in front of them.