Democrats protect ban on noncompete agreements from carve-outs sought by big businesses
Democrats successfully beat back an attack on the state's ban on noncompete agreements, one of their signature pro-worker victories in the 2023 session, with Republicans dropping demands for carve-outs for highly paid workers hours before a marathon special session began on Monday.
Under noncompete agreements, employees are barred from working for a competing company — or starting one — for a period of time and within a certain geographic area.
Rolling back the ban on noncompete agreements for highly paid workers and those with access to confidential and proprietary information was a top priority for Minnesota's largest companies, whose lobbyists argued the ban jeopardized their right to protect valuable scientific discoveries and trade secrets.
Democrats rejected that argument, saying the push to revive noncompete agreements was more about stifling competition and suppressing wages than protecting trade secrets.
'There's no evidence that noncompetes actually foster an innovator's economy,' said Rep. Emma Greenman, DFL-Minneapolis, an author of the ban. 'It actually does the opposite.'
About one in five American workers — in jobs ranging from medicine to child care — are bound by a noncompete agreement, and they cost workers more than $250 billion per year by decreasing competition, according to the Federal Trade Commission.
Under the Biden administration, the Federal Trade Commission moved to ban noncompete agreements nationwide last year, estimating it would increase new business development and raise workers' wages by an additional $524 per year on average. A federal court later blocked the ban, and the Trump administration signaled it's likely to reverse course.
Despite the pressure from large technology companies to repeal the ban, retired 3M chemical engineer and patent agent Jim Klein told lawmakers that Minnesota is on the right track. Klein, who managed 3M's intellectual property portfolio for 23 years, encouraged the House and Senate labor working group to maintain the blanket ban on noncompete agreements. He said the United States has sufficient protections for trade secrets — like the Uniform Trade Secrets Act — beyond restricting employees' careers.
'It does not make proprietary information any more secure,' Klein said.
Rep. Harry Niska, R-Ramsey, the author of the carve out, argued the ban would put the state at a competitive disadvantage, noting Minnesota is one of just four states with such broad non-compete bans. The other states with noncompete bans are North Dakota, Oklahoma and California, where the lack of enforceable non-compete agreements has been credited with fueling the immense, wealth-creating innovation of Silicon Valley.
The issue tied up the labor committee in the House for weeks until they reached a compromise that passed the House, which would have carved out workers making more than $200,000 and whose primary duties included 'the creation, analysis, or modification of trade secret information.' The bill also carved out workers making more than $500,000 a year regardless of their duties.
The Democratic-controlled Senate never passed that provision and the legislative session ended without a deal, which sent the issue to a labor working group, where Rep. Dave Baker, R-Willmar, tried to revive House Republicans' original proposal.
That would have carved out workers making more than $120,000 a year and whose primary duties include 'research and development or the creation, analysis, or modification of confidential, proprietary, or trade secret information.'
Greenman called the proposal a 'trojan horse' with language so broad that it would effectively allow employers to use noncompetes with any employee simply by calling their work 'confidential.'
The labor working group couldn't reach a compromise, but Baker said on the House floor on Monday night that lawmakers must revisit the issue or else large companies like Medtronic will shift operations elsewhere.
'If we don't fix this, these other companies are going to slip away,' Baker said.
Democrats were largely able to protect their progressive agenda from 2023 even while passing a smaller budget ahead of a forecasted deficit, with the notable exception of repealing MinnesotaCare for undocumented adults at the end of the year.
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