On the heels of other states that have targeted anti-poaching and non-solicitation provisions in Franchise Agreements, Minnesota has past a new law, as part of the state’s labor laws, to specifically prohibit anti-poaching and non-solicitation provisions in franchise agreements that restrict franchisees from hiring employees of another franchisee in that franchise system or from the franchisor itself. The new law also requires the removal of such provisions from existing franchise agreements. Several years ago, Washington passed a regulation prohibiting these anti-poaching and non-solicitation provisions and requiring amendments to existing franchise agreements so any franchisors that already offer and sell franchises in Washington have most likely removed these provisions already.
Minnesota Chapter 53 (S.F. No. 3035), was approved May 24, 2023, and became effective May 25, 2023.
The new Minnesota law states:
(a) No franchisor may restrict, restrain, or prohibit in any way a franchisee from soliciting or hiring an employee of a franchisee of the same franchisor;
(b) No franchisor may restrict, restrain, or prohibit in any way a franchisee from soliciting or hiring an employee of the franchisor; and
(c) Any provision of an existing contract that violates paragraph (a) or (b) is void and unenforceable. When a provision in an existing contract violates this section, the franchisee must provide notice to their employees of this law.
Further, the new Minnesota law requires that existing franchise agreements be amended to align with this prohibition:
Notwithstanding any law to the contrary, no later than one year from the effective date of this section, franchisors shall:
(1) amend existing franchise agreements to remove any restrictive employment provision that violates subdivision 2 (the above subdivision); or
(2) sign a memorandum of understanding with each franchisee that provides that any contract provisions that violate subdivision 2 (the above subdivision) in any way are void and unenforceable, and provides notice to the franchisee of their rights and obligations under this section.