Tag: Labor & Employment

Minnesota Legislature Agrees to Complete Ban on Noncompetes

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On May 11, 2023, the Minnesota Legislature agreed to a new law rendering void and unenforceable all future covenants not to compete, with limited exceptions for agreements entered into in connection with the sale or dissolution of a business. Following a final vote in the House and Senate, the law will be sent by Gov. Tim Walz for his signature. The law is written to take effect July 1, 2023, and to apply to contracts and agreements entered into on or after that date. With enactment, Minnesota will become the fourth state to impose a complete ban on employment-related noncompetes (joining California, Oklahoma and North Dakota).

The law prohibits any noncompete agreement with an employee or independent contractor that restricts the person from working for another business after termination of employment or independent contractor engagement regardless of a person’s income, with only two very limited carveouts for noncompetes agreed upon (1) during the sale of a business where the agreement prohibits the seller from carrying on a similar business within a reasonable geographical area for a reasonable period of time, or (2) in anticipation of the dissolution of a business where the dissolving partnership or entity agrees that all or any number of the partners, members, or shareholders will not carry on a similar business in a reasonable geographical area for a reasonable period of time. Subject to those limited exceptions, the law provides that any “covenant not to compete” contained in a contract is void and unenforceable. Importantly, a “covenant not to compete” does not include nondisclosure, confidentiality, trade secret, or non-solicitation agreements (including specifically those restricting the ability to use client or contact lists or restricting the solicitation of customers). Also, because “covenant not to compete” is defined in terms of prohibiting conduct “after termination of the employment,” the new law will not prohibit agreements that restrict an employee or independent contractor from working for another business while performing services for a business.

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Retail Employers and the National Labor Relations Act

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The recent trend of increasing union activity in retail and service industry workplaces makes it imperative that retailers, even those that do not have a unionized work force, understand the National Labor Relations Act (“NLRA”), and the ways the NLRA (as interpreted and enforced by the National Labor Relations Board “NLRB”) can impact an employer’s ability to protect its brand image through standard practice such as employee uniforms, severance agreements, and restricting certain activities on their premises.

Union organizing and election successes are on the rise at retail and service industry locations.  Since December of 2021, employees at nearly 300 Starbucks locations have voted to unionize. At the end of 2022, approximately 5% of all retail workers were represented by labor unions and the trend of increased unionization shows no sign of reversing.

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New NLRB Decision Limits Severance Agreement Terms for Employers

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The National Labor Relations Board (Board) issued a decision in February which should be on every employer’s radar, even if your employees are not unionized. The decision, McLaren Macomb, 372 NLRB No. 58 (Feb. 21, 2023), limits the confidentiality, non-disclosure, and non-disparagement terms employers may include in severance agreements with their lower-level employees. In the decision, the Board reversed course from two recent decisions which provided more latitude to employers in what they could include in agreements with former employees as long as signing the agreement was voluntary and the agreement was not offered under coercive conditions.

In McLaren Macomb, the Board snaps back to its earlier line of cases that held that provisions in a severance agreement that restrict an employee’s participation in the Board’s unfair labor practice proceedings violate the National Labor Relations Act (the Act). The Board also signaled that it may expand on this precedent, testing not just whether a severance agreement interferes with participation in an unfair labor practice proceeding but also whether it restricts an employee’s ability to exercise other rights protected by Section 7 of the Act. Because Section 7 gives employees the right to talk about working conditions with other employees and even the general public, broad-based confidentiality and non-disparagement clauses will likely run afoul of the new requirements. In March, the General Counsel issued additional guidance that indicated that the NLRB will broadly interpret this holding and go after not only confidential, non-disparagement, and non-disclosure clauses but any portion of a severance agreement that might restrict a former employee’s participation in Board proceedings or exercising his or her Section 7 rights.

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