Minnesota Legislature Takes Up Noncompetition, Paid Family Leave, Cannabis Legalization, and Privacy Bills in 2023 Session

Minnesota’s 2023 legislative session is off to a hot start and turning out to be an important one for Minnesota employers and companies doing business in Minnesota. Currently, there are four noteworthy bills that employers should keep an eye on as they progress through the Minnesota Legislature. Below is a brief summary of each of the bills.

House File 1237: Covenants Not to Compete

On February 2, 2023, the Minnesota House of Representatives introduced House File (HF) 1237, titled, in relevant part, “A bill for an act relating to employment; providing that covenants not to compete are void and unenforceable; providing for the protection of substantive provisions of Minnesota law to apply to matters arising in Minnesota,” and it was referred to the Committee on Labor and Industry Finance and Policy on the same day.

HF 1237 is notable because its provisions, if enacted, will place Minnesota among a growing number of states, as well as the federal government, that have moved to limit restrictive covenants. For example, last year Colorado enacted a law limiting the use of noncompetes. In May 2022, the New Jersey Legislature took up a very restrictive bill on noncompetes, and in January 2023 the Federal Trade Commission (FTC) issued a notice of proposed rulemaking that would outlaw the use of noncompetes.

The current text of HF 1237 provides, “Any covenant not to compete contained in a contract or agreement is void and unenforceable.” This provision would be retroactive as well, meaning that all existing agreements containing restrictive covenants would be void and unenforceable in Minnesota. However, the bill would not render an entire agreement unenforceable, as it provides, “Nothing in this subdivision shall be construed to render void or unenforceable any other provisions in a contract or agreement containing a void or unenforceable covenant not to compete.”

The bill also includes a choice-of-law provision that would prohibit an employer from requiring an employee “who primarily resides and works in Minnesota, as a condition of employment, to agree to a provision in an agreement or contract that would … (1) require the employee to adjudicate outside of Minnesota a claim arising in Minnesota; or (2) deprive the employee of the substantive protection of Minnesota law with respect to a controversy arising in Minnesota.”

Finally, the bill would also provide employers with 180 days to cure any agreement made void and unenforceable by the legislation.

HF 2: Family and Medical Leave

On January 4, 2023, the Minnesota House of Representatives introduced HF 2, titled, in relevant part, “A bill for an act relating to employment; providing for paid family, pregnancy, bonding, and applicant’s serious medical condition benefits.” HF 2 was referred to various committees and continues to gain steam in the legislature.

In brief, HF 2 would provide paid family and medical leave for Minnesota employees. In addition to including a number of compliance requirements (similar to an employer’s obligations under the federal Family and Medical Leave Act), HF 2 contains a number of provisions employers may want to note, including various notice and posting requirements; prohibitions on discrimination, interference with benefits, and retaliation; and protections related to an employee’s right to reinstatement.

HF 100: Cannabis Legalization

On January 4, 2023, the Minnesota House of Representatives introduced HF 100, titled, in relevant part, “A bill for an act relating to cannabis use and sales[,] legalizing and limiting the possession and use of cannabis by adults.” HF 100 has made its way through various committees and continues to gain traction in the Minnesota House of Representatives. In addition, Governor Tim Walz has already announced his support for the bill and said he would sign it if/when it hits his desk.

HF 100 is notable for employers because, among other things, it would revise and amend Minnesota’s Drug and Alcohol Testing in the Workplace Act (DATWA) and Minnesota’s Off-Duty Conduct Law.

With respect to the amendments to the DATWA, the bill provides that employers “must not request or require a job applicant to undergo cannabis testing or drug and alcohol testing solely for the purpose of determining the presence or absence of cannabis as a condition of employment unless otherwise required by state or federal law.” While it appears employers would be restricted in testing for cannabis with pre-employment drug and alcohol tests, employers would be permitted to test employees if they had reasonable suspicion that an employee “[did] not possess that clearness of intellect and control of self that the employee otherwise would have.” The bill unfortunately does not provide any insight into this reasonable suspicion “test.”

HF 100 would allow an employer to “enact and enforce written work rules prohibiting cannabis flower and cannabinoid product use, possession, impairment, sale, or transfer while an employee is working or while an employee is on the employer’s premises or operating the employer’s vehicle, machinery, or equipment in a written policy that contains the minimum information required by [the legislation].”

Ultimately, employers that drug test may have to change a number of practices and drug testing programs, especially as they relate to testing for cannabis if HF 100 is enacted as written.

The bill would also revise Minnesota’s Off-Duty Conduct Law, which states that “[a]n employer may not refuse to hire a job applicant or discipline or discharge an employee because the applicant or employee engages in or has engaged in the use or enjoyment of lawful consumable products, if the use or enjoyment takes place off the premises of the employer during nonworking hours.” The law, as amended by the bill, would specifically provide that the “[c]annabis flower and cannabinoid products are lawful consumable products for the purpose of Minnesota law, regardless of whether federal or other state law considers cannabis use, possession, impairment, sale, or transfer to be unlawful.” (Emphasis added.) Accordingly, this bill would limit employers’ ability to refuse to hire individuals or discipline employees for their use of cannabis off premises and not during work hours.

Senate File 950: Protecting Consumer Privacy

Last but not least, the Minnesota Senate recently began consideration of Senate File (SF) 950, “[a] bill for an act relating to consumer data privacy; requiring a consumer’s consent prior to collecting personal information.” Under the bill’s provisions, businesses would not be able to “collect, use, or disclose a consumer’s personal information without the consumer’s consent.” To receive a consumer’s consent, a business would have to notify the consumer, at or before the point of collection of the consumer’s personal information, of the following:

• “the categories of personal information the business collects about the consumer”;
• “the categories of sources from which the business collects the personal information”;
• “for each category of personal information, the purpose for collecting the personal information”; and
• “for each category of personal information, the categories of persons to which the personal information may be disclosed and the purpose for the disclosure.”

The Minnesota Attorney General’s Office would be empowered to seek penalties, remedies, and attorneys’ fees against businesses that violate the law. The bill also provides a private right of action that would allow a “damaged” consumer to “bring an action against the responsible business to cover any damages sustained, plus costs and reasonable attorney fees.”

Ogletree Deakins’ Minneapolis office will continue to report on developments with respect to the three bills referenced above and will post updates on the Minnesota blog as additional information becomes available. Important information for employers is also available via the firm’s webinar and podcast programs.