On May 16, 2023, the Minnesota legislature adopted a revision to the Minnesota Statutes (§181.99) which prohibits restrictive franchise agreements commonly called “no-poach” or “non-solicitation” agreements. Specifically, this new statute bars franchisors from restricting or prohibiting a franchisee from soliciting an employee of its franchisor or a franchisee of the same franchisor.

The definition of “employee” within this new section of the law is very broad and specifically includes independent contractors. The law also states that any provision contained within an existing contract that violates the law is void and unenforceable. This section further requires that, if a contract violates the new statute, franchisees provide notice to their employees of the new law.

Furthermore, franchisors must, within one (1) year of the effective date, either amend any existing franchise agreements to remove any restrictive employment covenants that directly violate the law or sign a memorandum of understanding with each franchisee acknowledging that any provisions within existing contracts that violate the law in any way are void and unenforceable, and notifying the franchisee of their rights and obligations under the law.

This portion of the law is now effective, as Governor Walz signed the law on May 24, 2023, and it provides that it became effective the day following final enactment.

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