Noncompete Agreements in the Hospitality Industry

Understanding Noncompete Agreements

A noncompete agreement, also known as a covenant not to compete, is a contractual provision that purports to restrict an employee’s ability to engage in certain competitive activities after the employment ends. In Minnesota, the definition is precise: a “covenant not to compete” is an agreement that restricts the employee, after termination, from performing “(1) work for another employer for a specified period of time; (2) work in a specified geographical area; or (3) work for another employer in a capacity that is similar to the employee’s work for the employer that is party to the agreement” (Minn. Stat. § 181.988, subd. 1, available at https://www.revisor.mn.gov/statutes/cite/181.988).

For you as a Minnesota employer, the operative point is what the statute does with that definition. Any such covenant contained in an employment contract or agreement is “void and unenforceable,” subject only to narrow business-sale or business-dissolution circumstances (Minn. Stat. § 181.988, subd. 2, available at https://www.revisor.mn.gov/statutes/cite/181.988). The applicability date is set by the enacting session law: the ban reaches contracts and agreements entered into on or after July 1, 2023 (2023 Minn. Laws ch. 53, art. 6, § 1, available at https://www.revisor.mn.gov/laws/2023/0/Session+Law/Chapter/53/). The statute is not retroactive, so noncompetes signed before July 1, 2023, are not reached by the ban.

The applicability date is worth pinning down, because it does not appear in the codified section itself. It lives in the enacting session law, 2023 Minnesota Laws chapter 53, article 6, section 1, which applies the ban to contracts and agreements entered into on or after July 1, 2023 (available at https://www.revisor.mn.gov/laws/2023/0/Session+Law/Chapter/53/). The statute also excludes nondisclosure, trade-secret, and nonsolicitation agreements from the definition of a covenant not to compete, so those protective tools remain available to you.

Because most new employment noncompetes are now void outright, the old questions of consideration and reasonable scope no longer decide validity for them. Under Minn. Stat. § 181.988, subd. 2(a), a covenant not to compete is “void and unenforceable” regardless of the consideration you paid or how narrowly you drew it (available at https://www.revisor.mn.gov/statutes/cite/181.988). Adequate consideration and reasonable scope (in substance, duration, and geographic territory) still matter, but only for the covenants the statute continues to permit: the sale-of-business and business-dissolution exceptions in subdivision 2(b), each of which the statute confines to a “reasonable geographic area” (and, for the sale-of-business exception, a “temporary” covenant for a “reasonable length of time”) (Minn. Stat. § 181.988, subd. 2(b), available at https://www.revisor.mn.gov/statutes/cite/181.988).

The same is true of careful drafting. Tailoring the duration, geographic scope, and restricted activities once meant the difference between an enforceable and an unenforceable covenant. For any employment agreement, that craftsmanship cannot save the covenant, because the covenant is “void and unenforceable” by statute (Minn. Stat. § 181.988, subd. 2, available at https://www.revisor.mn.gov/statutes/cite/181.988). The narrow sale-of-business and dissolution carve-outs sit in subdivision 2(b): the sale-of-business covenant must be “temporary” and limited to a “reasonable geographic area” and a “reasonable length of time,” while the dissolution covenant must be limited to a “reasonable geographic area” (Minn. Stat. § 181.988, subd. 2(b), available at https://www.revisor.mn.gov/statutes/cite/181.988).

Enforcement in the Hospitality Industry

In the hospitality industry, your trade secrets and customer relationships are genuinely valuable, and the instinct to lock them down with a noncompete is understandable. But for agreements entered into on or after July 1, 2023, Minnesota law makes employee noncompete agreements void and unenforceable, with no exception for hospitality. The statute provides flatly that “[a]ny covenant not to compete contained in a contract or agreement is void and unenforceable,” subject only to the sale-of-business and dissolution exceptions (Minn. Stat. § 181.988, subd. 2(a), available at https://www.revisor.mn.gov/statutes/cite/181.988). The statute defines a covered “employee” to include independent contractors, so reclassifying a worker does not get you out from under the ban.

The practical takeaway is the opposite of what was once true: you cannot rely on a court upholding a noncompete signed by a hospitality worker on or after July 1, 2023, and defining the scope of restricted activities and the geographic area narrowly does not change that. The statutory definition of a covered covenant carries no industry carve-out, so hospitality-sector employee noncompetes fall squarely within the ban (Minn. Stat. § 181.988, subd. 1(a), available at https://www.revisor.mn.gov/statutes/cite/181.988).

For agreements signed before July 1, 2023, the statutory ban does not apply, because the ban reaches only contracts and agreements entered into on or after that date (2023 Minn. Laws ch. 53, art. 6, § 1, available at https://www.revisor.mn.gov/laws/2023/0/Session+Law/Chapter/53/). So whether you are looking at a new agreement (void) or an older one (outside the statutory ban), the confident assumption that a court will back your noncompete is now wrong for current agreements.

If you need to protect proprietary information, build your strategy on what the statute leaves intact: nondisclosure and confidentiality agreements, trade-secret protection, and nonsolicitation agreements, or on the narrow sale-of-business and dissolution carve-outs in subdivision 2(b), where a temporary and geographically restricted covenant within reasonable limits remains permitted (Minn. Stat. § 181.988, subd. 2, available at https://www.revisor.mn.gov/statutes/cite/181.988).

Protecting Trade Secrets and IP

Because the noncompete door is closed, your protection for trade secrets and intellectual property now runs entirely through the tools the statute preserves. In hospitality, proprietary information such as recipes, operational systems, and marketing strategies can be a real competitive advantage, and you can still protect it. Minnesota’s noncompete ban expressly excludes from its definition any nondisclosure agreement, any agreement designed to protect trade secrets or confidential information, and any nonsolicitation agreement, including restrictions on using client or contact lists or soliciting your customers (Minn. Stat. § 181.988, subds. 1-2, available at https://www.revisor.mn.gov/statutes/cite/181.988). Those agreements remain enforceable.

Require employees who handle sensitive information to sign confidentiality and nondisclosure agreements that prohibit unauthorized disclosure or use. These can be effective at preventing a former employee from carrying your trade secrets to a competing business, and they do not run afoul of the noncompete ban. The shift in strategy is the point: where you might once have reached for a noncompete, the durable protection now comes from a well-drafted confidentiality agreement paired with sound trade-secret hygiene.

Balancing Business Interests and Employee Rights

Even with noncompetes off the table for new hires, you still face the underlying question of how to protect business interests without overreaching. The answer is to focus your effort on the covenants that remain enforceable and to draft those carefully.

Protecting Trade Secrets

The first line of defense is operational, not just contractual. Implement robust data encryption for sensitive files, emails, and digital communications that contain trade secrets. Use secure storage for physical documents that contain confidential information: locked cabinets, controlled-access rooms, and need-to-know access. Establish clear policies for accessing, sharing, and storing confidential information, designate authorized personnel, and conduct periodic security audits to confirm compliance.

These measures do more than deter misappropriation. Trade-secret protection depends on showing that the information derives independent economic value from not being generally known and that you made reasonable efforts to keep it secret. Building those safeguards into daily operations is what makes the legal protection real, and it does so without restricting any employee’s right to take a new job.

Restrictive Covenant Limits

Most restrictive covenants the statute leaves available carry no geographic-reasonableness test at all: a nonsolicitation agreement, or a nondisclosure or confidentiality covenant, is excluded from the noncompete ban outright and is not measured against a “reasonable geographic area” requirement. Draft those no broader than necessary to protect the legitimate interest at stake. The geographic-reasonableness limit is a feature of only the two statutory carve-outs that permit an actual noncompete. For a surviving sale-of-business or business-dissolution covenant, the statute itself supplies the limits: the covenant must be confined to a “reasonable geographic area,” and a sale-of-business covenant must also be “temporary” and limited to a “reasonable length of time” (Minn. Stat. § 181.988, subd. 2(b)(1)-(2), available at https://www.revisor.mn.gov/statutes/cite/181.988). For the dissolution carve-out, the statute ties the reasonable area to “where the business has been transacted,” so a geographic restriction confined to where the business actually operated fits that limit more comfortably than a sweeping one.

For employment noncompete agreements entered into on or after July 1, 2023, however, reasonableness is no longer the test. Under Minn. Stat. § 181.988, subd. 2(a), any such covenant not to compete is “void and unenforceable” per se, regardless of how narrow or reasonable it may be, with statutory exceptions only for the sale or dissolution of a business (available at https://www.revisor.mn.gov/statutes/cite/181.988). So for a new employment agreement, there is no “reasonable” version of an employee noncompete to draft toward. Restrictions on working in a similar capacity, in a particular geographic area, or for a competing employer are unenforceable rather than merely subject to judicial reasonableness review.

Legal Challenges and Debates

Noncompete agreements have drawn intense legal and policy scrutiny, and Minnesota’s 2023 ban is part of a broader national reassessment of whether these restraints help or harm competition and worker mobility. The debate that animated reform pits an employer’s interest in protecting trade secrets and confidential information against an employee’s right to move freely and compete fairly. Minnesota resolved that debate by statute for employment noncompetes: it banned them.

That national conversation also produced a short-lived federal effort. As of 2026, there is no federal rule banning noncompetes. The Federal Trade Commission’s Non-Compete Clause Rule (16 C.F.R. Part 910), finalized April 23, 2024, to ban most noncompetes nationwide, never took effect. In Ryan, LLC v. FTC, No. 3:24-cv-00986-E, 2024 WL 3879954 (N.D. Tex. Aug. 20, 2024), the court “set aside” the rule as exceeding the FTC’s statutory authority and as arbitrary and capricious, so it could not take effect on its September 4, 2024, effective date (available at https://law.justia.com/cases/federal/district-courts/texas/txndce/3:2024cv00986/389064/211/). The FTC initially appealed but, on September 5, 2025, filed to accede to vacatur and dismiss its appeal, and on February 12, 2026, formally removed Part 910 from the Code of Federal Regulations (available at https://www.ftc.gov/legal-library/browse/rules/noncompete-rule). The result for you is that noncompete enforceability remains governed by state law, not by any nationwide federal ban.

State-by-State Variations in Enforcement

Noncompete enforcement is governed primarily by state law, and it varies substantially from state to state, with some jurisdictions taking a more permissive approach and others a more restrictive stance. At the restrictive pole, California voids them outright, while most other states enforce reasonable noncompetes under a multi-factor reasonableness test. The absence of a uniform federal standard was confirmed when the FTC’s nationwide ban was judicially vacated and removed from the Code of Federal Regulations effective February 12, 2026, leaving enforcement to varying state law. If you operate in more than one state, that variation matters: the same agreement can be void in one jurisdiction and fully enforceable in another.

California’s Restrictive Approach

California has adopted a uniquely restrictive stance, voiding noncompete agreements in nearly all employment contexts. The cornerstone is California Business and Professions Code section 16600(a), which provides that “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” As amended effective January 1, 2024, subdivision (b)(1) directs courts to read the section broadly, “to void the application of any noncompete agreement in an employment context, or any noncompete clause in an employment contract, no matter how narrowly tailored, that does not satisfy an exception in this chapter” (available at https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?sectionNum=16600.&lawCode=BPC).

Two recent points are worth understanding precisely. First, the genuine exceptions to the ban are narrow and statutory: the sale of a business’s goodwill or ownership interest (section 16601), dissolution of or dissociation from a partnership (section 16602), and dissolution of or termination of a member’s interest in a limited liability company (section 16602.5). There is no statutory “trade-secret exception” to section 16600; the California Supreme Court in Edwards v. Arthur Andersen LLP, 44 Cal. 4th 937 (2008), expressly declined to address “the applicability of the so-called trade secret exception to section 16600.” Trade secrets are protected separately, through California’s Uniform Trade Secrets Act, not through any exception that permits a noncompete (available at https://scocal.stanford.edu/opinion/edwards-v-arthur-andersen-33130).

Second, enforcement runs primarily through a private right of action, not vaguely through “regulatory agencies.” As of January 1, 2024, an employer that enters into or attempts to enforce a void noncompete commits a civil violation, and a current, former, or prospective employee may sue for injunctive relief, actual damages, and reasonable attorney’s fees and costs (Cal. Bus. & Prof. Code § 16600.5, available at https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?sectionNum=16600.5.&lawCode=BPC). A related 2024 amendment required employers to send individualized notice by February 14, 2024, that existing noncompetes are void, with violations treated as unfair competition carrying a civil penalty of up to $2,500 per violation (Cal. Bus. & Prof. Code § 16600.1, available at https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?sectionNum=16600.1.&lawCode=BPC).

Florida’s Business-Friendly Stance

Florida sits at the opposite end. Its legislation and judicial precedents have established a permissive environment for the enforcement of noncompete agreements, which can matter to hospitality companies that operate across state lines. The general framework is Florida Statutes section 542.335, which expressly authorizes enforcement of reasonable restrictive covenants (Fla. Stat. § 542.335(1), available at https://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0500-0599/0542/Sections/0542.335.html). It directs a court to “construe a restrictive covenant in favor of providing reasonable protection to all legitimate business interests established by the person seeking enforcement” and provides that a court “shall not employ any rule of contract construction that requires the court to construe a restrictive covenant narrowly, against the restraint, or against the drafter of the contract” (Fla. Stat. § 542.335(1)(h), available at https://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0500-0599/0542/Sections/0542.335.html). It presumes reasonable any restraint of six months or less against a former employee and presumes unreasonable any restraint exceeding two years (Fla. Stat. § 542.335(1)(d), available at https://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0500-0599/0542/Sections/0542.335.html), and it directs a court to modify an overbroad covenant rather than voiding it (Fla. Stat. § 542.335(1)(c), available at https://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0500-0599/0542/Sections/0542.335.html).

As of July 1, 2025, Florida’s CHOICE Act made the environment even more employer-friendly for high earners. For “covered” employees and contractors (those earning more than twice the annual mean wage of the relevant Florida county), the Act authorizes noncompete and garden-leave agreements of up to four years and directs courts to issue preliminary injunctions enforcing them unless the employee rebuts by clear and convincing evidence (Fla. Stat. §§ 542.41-542.45, available at https://www.flsenate.gov/Session/Bill/2025/922). Licensed healthcare practitioners are excluded, and agreements entered into before July 1, 2025, remain governed solely by section 542.335.

Texas’s Industry-Specific Rules

Texas takes a more nuanced approach. It enforces reasonable noncompetes generally under Texas Business and Commerce Code section 15.50(a), which makes a covenant enforceable “if it is ancillary to or part of an otherwise enforceable agreement at the time the agreement is made to the extent that it contains limitations as to time, geographical area, and scope of activity to be restrained that are reasonable and do not impose a greater restraint than is necessary to protect the goodwill or other business interest of the promisee” (available at https://statutes.capitol.texas.gov/Docs/BC/htm/BC.15.htm). That single reasonableness standard applies across all industries.

There is one significant point of confusion worth correcting directly: Texas does not have industry-by-industry noncompete exemptions for oil and gas, agriculture or ranching, or radio and television broadcasters, and there is no Texas legal doctrine called an “oil waiver.” Those purported exceptions do not exist in the statute. The only profession-specific carve-out concerns health care. Section 15.50(b) imposes additional requirements on physician noncompetes (patient-list and medical-records access, a buyout option, and a continuing-care allowance), and section 15.50(c) provides that those requirements do not apply to a physician’s ownership interest in a licensed hospital or ambulatory surgical center (available at https://statutes.capitol.texas.gov/Docs/BC/htm/BC.15.htm).

Medical professionals are therefore not “exempt” from Texas noncompetes; their noncompetes are enforceable only if they meet statutory conditions. Effective September 1, 2025, Senate Bill 1318 tightened the physician rules to add a one-year maximum duration, a five-mile geographic cap, and a buyout capped at the physician’s total annual salary and wages, and added a new section 15.501 extending comparable enforceable-with-conditions rules to dentists, professional and vocational nurses, and physician assistants (Tex. Bus. & Com. Code § 15.501, available at https://statutes.capitol.texas.gov/Docs/BC/htm/BC.15.htm). For the record, broadcaster-specific noncompete bans do exist, but in other states: Arizona makes it unlawful for a broadcast employer to require a current or prospective employee to agree to a noncompete clause (A.R.S. § 23-494, available at https://www.azleg.gov/ars/23/00494.htm), and Massachusetts voids broadcasting-industry noncompetes that restrict an employee from obtaining employment in a specified geographic area for a specified period after termination (M.G.L. c. 149 § 186, available at https://malegislature.gov/Laws/GeneralLaws/PartI/TitleXXI/Chapter149/Section186).

Best Practices for Hospitality Employers

Because you can no longer use a noncompete with new hires in Minnesota, your talent-protection strategy should center on the agreements that remain enforceable. Use well-drafted confidentiality and nondisclosure agreements to protect recipes, systems, and other proprietary information, and use nonsolicitation agreements to protect your customer relationships and your workforce. Pair those agreements with strong operational safeguards so your trade-secret protection holds up if it is ever tested.

Draft the surviving covenants to be reasonable, fair, and clear, and communicate their purpose and scope to employees plainly. Overly aggressive restrictions, even where they are still permitted, tend to depress morale and invite disputes. If your matter involves the sale or anticipated dissolution of a business, a properly limited noncompete remains available, but it must be confined to a reasonable geographic area, and a sale-of-business covenant must also be temporary and limited to a reasonable length of time. If you are unsure which agreements you can still use and how to draft them for a Minnesota hospitality business, that is a question worth getting right before you rely on it.

Frequently Asked Questions

Can Noncompete Agreements Be Used for Low-Wage Hospitality Workers?

As a matter of national policy, imposing noncompete agreements on low-wage workers raises fairness concerns, because such workers often lack bargaining power and may be unduly restricted in seeking better opportunities. In Minnesota, that concern is largely moot: effective July 1, 2023, Minn. Stat. § 181.988, subd. 2 renders any covenant not to compete in an employment agreement void and unenforceable for all employees regardless of wage level, so hospitality workers and other low-wage workers cannot be bound by a noncompete entered on or after that date (available at https://www.revisor.mn.gov/statutes/cite/181.988). Pre-existing agreements and the narrow business-sale and dissolution exceptions are the only situations left.

Are Verbal Promises to Not Compete Legally Enforceable?

In Minnesota, a verbal promise not to compete generally cannot be enforced in the employment context. Under Minn. Stat. § 181.988, subd. 2(a), any covenant not to compete in an employment contract or agreement is “void and unenforceable” (available at https://www.revisor.mn.gov/statutes/cite/181.988). The only situations in which a noncompete can still be enforceable are the statutory exceptions in subdivision 2(b): a covenant agreed upon during the sale of a business, with reasonable time and geographic limits, or a covenant agreed upon in anticipation of the dissolution of a partnership, LLC, or corporation, limited to a reasonable geographic area.

Do Noncompete Agreements Apply to Independent Contractors?

In Minnesota, noncompete agreements with independent contractors are void and unenforceable on the same terms as those with traditional employees. The statute that bans most noncompetes defines “employee” to expressly include independent contractors (and the corporate entities they are required to form), so an independent contractor’s classification does not exempt the restriction from the ban (Minn. Stat. § 181.988, subds. 1, 2, available at https://www.revisor.mn.gov/statutes/cite/181.988). The narrow surviving exceptions apply only to noncompetes tied to the sale of a business or the dissolution of a partnership or other entity.

Can Noncompete Agreements Be Used to Prevent Employee Poaching?

In Minnesota, employee noncompete agreements are void and unenforceable for any agreement entered into on or after July 1, 2023, so they cannot be used to restrict a former employee from working for a competitor. Your legitimate interests in confidential information and trade secrets are instead protected by tools the statute expressly excludes from the ban: nondisclosure agreements, agreements designed to protect trade secrets or confidential information, and nonsolicitation agreements, all of which remain enforceable (Minn. Stat. § 181.988, subds. 1-2, available at https://www.revisor.mn.gov/statutes/cite/181.988). A true employee-poaching concern, meaning recruiting away your workers, is addressed by no-poach or employee-nonsolicitation provisions, not by a covenant not to compete restricting the departing employee’s own future work.

Are Noncompete Agreements Enforceable Across State Lines?

Whether a noncompete is enforceable can turn on which state’s law applies and where the dispute is litigated. California, for example, voids most noncompetes by statute (Cal. Bus. & Prof. Code § 16600(a), available at https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?sectionNum=16600.&lawCode=BPC), while states like Florida and Texas enforce reasonable covenants. Drafters often add choice-of-law and forum-selection clauses to try to fix the governing law and venue, but those provisions cannot guarantee the result. Minnesota law, for example, makes a forum-selection or choice-of-law provision voidable at the employee’s option for any employee who primarily resides and works in Minnesota; if the employee voids it, “the matter shall be adjudicated in Minnesota and Minnesota law shall govern the dispute” (Minn. Stat. § 181.988, subd. 3, available at https://www.revisor.mn.gov/statutes/cite/181.988).