How to Invalidate an Out-of-State Non-Compete Agreement When Moving to North Dakota
Moving to North Dakota lets workers void out-of-state non-competes through a $160 court filing or a $500 to $2,500 attorney representation package. Under N.D. Cent. Code § 9-08-06 and Osborne v. Brown & Saenger, Inc., 904 N.W.2d 34 (ND Supreme Court 2017), state public policy overrides foreign choice-of-law and forum-selection clauses.
Relocating to Fargo, Bismarck, or the Bakken energy corridor in Minot and Williston offers professionals lucrative career opportunities in healthcare, agriculture, technology, and oilfield services. However, workers moving from states like Texas, Minnesota, or South Dakota frequently carry employment agreements containing strict out-of-state non-compete clauses. Former employers routinely threaten to sue relocated workers in their home states to bypass North Dakota's statutory ban on restrictive covenants.
Fortunately, the North Dakota Supreme Court has closed the legal loopholes that out-of-state corporations once used to enforce foreign non-competes against North Dakota workers. By understanding how state courts neutralize foreign choice-of-law and forum-selection clauses, you can legally protect your livelihood after moving to North Dakota.
How North Dakota Public Policy Voids Out-of-State Non-Competes
Under N.D. Cent. Code § 9-08-06, any contract that restrains an individual from exercising a lawful profession, trade, or business is void unless it involves the sale of a business or dissolution of a partnership. For decades, out-of-state corporations attempted to circumvent this statute by inserting contract language requiring disputes to be governed by the laws of another state and litigated in out-of-state courts.
In the landmark decision Osborne v. Brown & Saenger, Inc., 904 N.W.2d 34 (ND Supreme Court 2017), the North Dakota Supreme Court, Bismarck decisively shut down this strategy. The court held that North Dakota has a fundamental public policy protecting individuals working within its borders from unlawful restraints on trade, rendering both foreign choice-of-law and foreign forum-selection provisions unenforceable when used to validate a non-compete.
Defeating Out-of-State Choice of Law Provisions
A choice-of-law clause specifies which state's statutes will govern a contract dispute-for instance, declaring that Texas or Delaware law applies even if the employee relocates to North Dakota. When evaluating whether to honor a foreign choice-of-law clause, North Dakota courts apply a conflict-of-laws significant-contacts analysis coupled with fundamental public policy scrutiny.
Under Osborne v. Brown & Saenger, Inc., 904 N.W.2d 34 (ND Supreme Court 2017), a North Dakota court will refuse to apply another state's substantive law if doing so would violate N.D. Cent. Code § 9-08-06. Once you establish your work situs and residence in North Dakota, the state's interest in regulating commercial competition and employment within its borders outweighs a former employer's preference for foreign law. This protection also extends to customer non-solicitation clauses, which are equally void under Warner and Co. v. Solberg, 634 N.W.2d 65 (ND Supreme Court 2001).
Overcoming Foreign Forum Selection Clauses
Even more dangerous than a choice-of-law provision is an exclusive forum-selection clause, which requires any lawsuit to be filed in the employer's home city, such as Minneapolis, Sioux Falls, or Houston. Employers know that if they can drag a worker into an out-of-state courtroom, the foreign judge may ignore North Dakota law and issue a nationwide injunction.
North Dakota neutralizes this tactic through two statutes: N.D. Cent. Code § 9-08-05, which voids contractual terms that restrict a party from enforcing their legal rights through ordinary tribunal proceedings, and N.D. Cent. Code § 9-08-06. As confirmed in Osborne v. Brown & Saenger, Inc., 904 N.W.2d 34 (ND Supreme Court 2017), enforcing a forum-selection clause that sends a North Dakota worker to a foreign court where the non-compete would be enforced violates North Dakota public policy.
| Out-of-State Contract Clause | Employer's Intended Goal | North Dakota Court Ruling |
|---|---|---|
| Foreign Choice of Law | Apply another state's pro-employer non-compete law | Overridden by N.D. Cent. Code § 9-08-06 public policy |
| Foreign Forum Selection | Force employee to litigate in an out-of-state court | Unenforceable under Osborne v. Brown & Saenger, Inc., 904 N.W.2d 34 (ND Supreme Court 2017) |
| Customer Non-Solicitation | Bar worker from contacting clients in North Dakota | Void under Warner and Co. v. Solberg, 634 N.W.2d 65 (ND Supreme Court 2001) |
| Trade Secret / NDA Clause | Prevent theft of confidential data and formulas | Enforceable under N.D. Cent. Code § 47-25.1-01 |
Step-by-Step Process in North Dakota to Invalidate an Out-of-State Non-Compete
Whether you are relocating to Fargo, Bismarck, Grand Forks, or Minot, taking proactive steps before your former employer files suit in another state is critical.
Step 1: Establish Bona Fide North Dakota Domicile and Employment Nexus
Before resigning or launching a competing venture, establish clear legal residency in North Dakota under N.D. Cent. Code § 54-01-26. Execute a North Dakota residential lease or home purchase, obtain a North Dakota driver's license, register to vote, and ensure your new employment offer specifies that your work duties will be performed within North Dakota.
Step 2: Purge Former Employer Devices and Protect Trade Secrets
Out-of-state employers who cannot enforce a non-compete often pivot to suing for trade secret misappropriation under N.D. Cent. Code § 47-25.1-01. Return all company hardware, do not email yourself customer lists, and sign a clean onboarding compliance acknowledgment with your new North Dakota employer.
Step 3: File a Preemptive Declaratory Judgment Action in North Dakota
In interstate non-compete disputes, winning the race to the courthouse is crucial so a North Dakota judge-rather than a foreign judge-applies conflict-of-laws rules. Under the Declaratory Judgments Act, N.D. Cent. Code § 32-23-01 and N.D. Cent. Code § 32-23-02, alongside N.D. R. Civ. P. 57, your attorney can file a preemptive lawsuit asking the court to declare your out-of-state non-compete void.
Depending on where you live and work, you can file in the Cass County District Court, Fargo, Burleigh County District Court, Bismarck, Grand Forks County District Court, Grand Forks, or Ward County District Court, Minot using Form 1, North Dakota, District Court, Summons in a Civil Action. If diversity jurisdiction exists under 28 U.S.C. § 1332, the action may also proceed in the U.S. District Court for the District of North Dakota, Fargo or the U.S. District Court for the District of North Dakota, Bismarck using Form JS-44, FED, U.S. District Court, Civil Cover Sheet and Form AO-440, FED, U.S. District Court, Summons in a Civil Action.
Step 4: Seek a Temporary Restraining Order or Summary Judgment
Alongside your complaint, your lawyer can file a motion under N.D. R. Civ. P. 65 and N.D. R. Ct. 3.2 to enjoin the former employer from enforcing the restrictive covenant against you in North Dakota. Because the issue is purely a matter of statutory law, courts frequently resolve these cases via summary judgment under N.D. R. Civ. P. 56.
How Much Does It Cost in North Dakota?
Invalidating an out-of-state restrictive covenant involves predictable legal and court costs:
- Relocation Risk Assessment & Legal Opinion: A consultation and written strategy memo from a North Dakota employment lawyer typically costs $400 to $900.
- Preemptive Notice & Cease-and-Desist Defense: Negotiating an amicable waiver with your former employer's legal counsel ranges from $750 to $2,500.
- Court Filing & Service Fees: Filing a declaratory judgment action in a North Dakota District Court costs $160 under N.D. Cent. Code § 27-05.2-03, while federal court filing fees are $405, plus $60 to $150 for out-of-state service of process.
- Preemptive Declaratory Judgment Litigation: Retaining an attorney to file and litigate a preemptive lawsuit through summary judgment generally costs between $3,500 and $12,000.
How Long Does the Process Take?
An attorney can prepare a relocation strategy and draft a preemptive complaint within 3 to 7 business days. If you seek a temporary restraining order or preliminary injunction under N.D. R. Civ. P. 65, a hearing is typically scheduled within 14 to 30 days, while final declaratory judgment orders generally conclude within 2 to 6 months. You can connect with an experienced litigator in our directory of North Dakota employment lawyers to build your relocation defense before changing jobs.
Frequently Asked Questions (FAQ)
What happens if my former employer sues me in their home state before I file in North Dakota?
If the employer files first in another state, you may have to hire counsel in both states to contest personal jurisdiction or argue that North Dakota law applies. Filing a preemptive declaratory judgment action in North Dakota under N.D. Cent. Code § 32-23-02 helps secure your home forum first.
Does North Dakota law protect me if I live in Fargo but work remotely for a company in another state?
North Dakota protection is strongest when both your residence and the physical performance of your work occur inside North Dakota. If your job duties and customers are entirely outside North Dakota, a court will closely examine which state has the most significant contacts.
Can a federal court in North Dakota also void my out-of-state non-compete?
Yes. When a case is removed to federal court based on diversity jurisdiction under 28 U.S.C. § 1332, the federal judge applies North Dakota substantive conflict-of-laws rules and N.D. Cent. Code § 9-08-06.
Does Osborne v. Brown & Saenger, Inc., 904 N.W.2d 34 (ND Supreme Court 2017) also invalidate out-of-state customer non-solicitation clauses?
Yes. Because North Dakota treats customer non-solicitation agreements as unlawful restraints on trade under Warner and Co. v. Solberg, 634 N.W.2d 65 (ND Supreme Court 2001), out-of-state customer solicitation bans are equally void in North Dakota.
What if my out-of-state contract includes a mandatory arbitration clause?
While arbitration clauses are generally governed by the Federal Arbitration Act, 9 U.S.C. § 2, your attorney can demand that the arbitrator apply N.D. Cent. Code § 9-08-06 to declare the underlying non-compete void.
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