Last summer, we reported to you that—as of July 1, 2023—Minnesota state law would prohibit, with few exceptions, future noncompete agreements between employers and employees, regardless of income, title, or role. However, all previously existing noncompetes would continue to be valid.
That, as they say, was then. This is now.
In April 23, 2024, the Federal Trade Commission (FTC) issued its own final ruling on the subject of restrictive covenants. Like Minnesota state law, the federal ruling prohibits any workplace policy or contract that functions as a post-employment non-compete restriction. However, the federal rule, supersedes Minnesota state law in two key ways:
- it prohibits previously executed noncompetes; and
- it does not apply to “senior executives” who:
- earn at least $151,164 annually (the anticipated 2025 Department of Labor definition of a highly compensated employee), and
- are employed in a policy-making position (e., those positions that are defined as a CEO or other officer with final decision-making authority over business policies). The term “senior executive” does not include those persons whose roles are limited to advising or merely influencing business decisions.
The FTC ruling does not invalidate restrictions on non disparagement and the solicitation of clients and employees. Neither does it affect confidentiality clauses.
This ruling will go into effect on September 4, 2024, 120 days after the ruling was published in the Federal Register.