Minnesota non-compete law: Minn. Stat. 181.988 for recruiters

Minnesota banned employee non-competes for agreements signed on or after July 1, 2023. Minn. Stat. 181.988 makes any covenant not to compete in a contract "void and unenforceable," covers independent contractors as well as employees, and stops employers from using a choice-of-law or venue clause to route a Minnesota worker's dispute somewhere else. Non-solicitation and confidentiality agreements are carved out of the ban, so they still matter. A second statute, added in 2024, speaks directly to staffing firms: a service provider may not stop its customer from hiring the service provider's employees.

For the screening questions themselves, see non-compete questions for candidates. For the agency's own client and recruiter clauses, see non-solicitation clauses for recruiters.

The statute

Minn. Stat. 181.988 was enacted by Laws 2023, chapter 53, article 6, section 1. The session law says the section "is effective July 1, 2023, and applies to contracts and agreements entered into on or after that date." The working parts:

• What counts. A covenant not to compete is an agreement that restricts the employee, after the job ends, from working for another employer for a specified period, in a specified geographical area, or for another employer in a capacity similar to their work for the employer.
• The rule. Subdivision 2(a): "Any covenant not to compete contained in a contract or agreement is void and unenforceable."
• The exceptions. A covenant agreed during the sale of a business, or in anticipation of the dissolution of a business, with a reasonable geographic area and length of time.
• Who is covered. "Employee" means any individual who performs services for an employer, including independent contractors. The definition of independent contractor also reaches an entity the employer required the individual to form as a condition of being paid.
• The rest of the contract survives. A void non-compete does not void other provisions in the same agreement.
• Fees. A court may award reasonable attorney fees to an employee enforcing these rights, in addition to injunctive relief and other remedies.

What the ban does not cover

The definition says a covenant not to compete "does not include a nondisclosure agreement, or agreement designed to protect trade secrets or confidential information," and "does not include a nonsolicitation agreement, or agreement restricting the ability to use client or contact lists, or solicit customers of the employer."

Choice of law and venue

Subdivision 3 stops an employer from requiring, as a condition of employment, that an employee "who primarily resides and works in Minnesota" agree to adjudicate a Minnesota claim outside Minnesota, or give up the substantive protection of Minnesota law for a controversy arising in Minnesota. A provision that does either is voidable by the employee at any time; if the employee voids it, the matter is decided in Minnesota under Minnesota law. Adjudication includes arbitration as well as litigation. The subdivision applies only to claims arising under section 181.988.

For recruiters, that means a Minnesota candidate whose agreement names Delaware law or a New York court is not automatically bound by that choice for a non-compete claim. It also means the question "which state were you living and working in?" matters as much as the agreement's own wording.

The staffing-firm rule: 181.9881

Minn. Stat. 181.9881, added by Laws 2024, chapter 110, article 2, section 12, effective July 1, 2024 and applying to contracts and agreements entered into on or after that date, is aimed at service providers rather than individual employees:

• "No service provider may restrict, restrain, or prohibit in any way a customer from directly or indirectly soliciting or hiring an employee of a service provider."
• A "service provider" is any partnership, association, corporation, business, trust or group of persons acting directly or indirectly as an employer or manager for work contracted or requested by a customer. "Employee" includes independent contractors.
• A provision of an existing contract that violates the rule is void and unenforceable, and the service provider must give its employees notice of the section and of the offending covenant.
• The section does not apply to workers providing professional business consulting for computer software development and related services who are seeking employment through a service provider with the knowledge and intention of being considered for a permanent position with the customer later.

This reaches the conversion and no-hire terms many agencies put in client agreements. Whether a conversion fee counts as a restraint under this wording is a drafting question for counsel, not something to infer from this page. If you place contractors with Minnesota clients, have your placement fee agreement reviewed against 181.9881, and check the separate licensing rules in the Minnesota staffing agency license guide.

When the hiring company is in Minnesota

The ban runs both ways. A Minnesota client should not be putting a covenant not to compete in its own offer paperwork for agreements it enters into now, outside the sale and dissolution exceptions. If a client's template still carries one, mention it before the offer goes out; the offer call script is the natural point to confirm what the candidate will be asked to sign. Non-solicitation and confidentiality terms in the same template are outside 181.988, so they are a separate review.

What a recruiter can and cannot ask

The date the agreement was signed is the single most useful fact in Minnesota, because it decides whether the 2023 ban applies at all. Ask for it plainly.

MINNESOTA CANDIDATE — restrictive agreements

1. "Have you signed any agreement that could limit you taking this
    role: a non-compete, a non-solicit, or a confidentiality agreement?"
2. "Do you know roughly when you signed it? Before or after mid-2023?"
3. "Was it tied to selling a business or an ownership stake?"
4. "Is it about not working for competitors, not contacting clients,
    or not hiring former colleagues?"
5. "Were you living and working in Minnesota when you signed it?"
6. "Would you be able to share it with the hiring company's lawyer,
    as far as the agreement allows?"
Always: "We don't want any confidential information or client lists
from your current employer."

• Do record what the candidate tells you as facts: type, date, length, scope, state.
• Do suggest the candidate review the agreement with an employment lawyer before resigning.
• Do not tell a candidate that "non-competes are illegal in Minnesota now." That is only true for agreements in scope, and it says nothing about their non-solicit.
• Do not ask for the agreement's confidential terms, the employer's client names or any document beyond what the hiring company's counsel requests.

Federal status

As of October 2026 no federal ban applies. The FTC's Noncompete Rule page records a district court order of August 20, 2024 stopping the rule; the Commission voted on September 5, 2025 to dismiss its appeals and accede to the vacatur, and a February 12, 2026 Federal Register notice removed the rule from the Code of Federal Regulations. The FTC continues to act against individual employers, such as its April 2026 Rollins order. Minnesota's own statute is what decides most Minnesota cases.

Checklist

• Signing date captured for every restrictive agreement a Minnesota candidate mentions.
• Non-solicits and confidentiality obligations recorded separately from non-competes.
• State of residence and work at signing noted, for the choice-of-law rule.
• No enforceability opinion given to the candidate.
• Agency client agreements with Minnesota customers reviewed against 181.9881.
• Revisor's text re-checked before relying on this page.