Legislatures are not pleased. Franchisors are accused of overreaching with employment restrictions. New governmental intervention into the franchise relationship requires companies to perform high level reviews of their offering documents. Franchisors seeking to enforce limitations on competition should revisit their franchise agreements, particularly in certain states.

Effective immediately, franchisors subject to the new Minnesota law are prohibited from enforcing “no-poach” and nonsolicitation provisions, restricting franchisees from soliciting or hiring an employee from another franchisee of the same franchisor or from the franchisor itself. The Minnesota law also invalidates any existing provision that violates these new prohibitions. Within one year, franchisors must also amend existing franchise agreements to remove any restrictive employment agreement that violates the new Minnesota law. In the alternative, a franchisor can sign a memorandum of understanding acknowledging that any existing provisions that violate the new law are void and unenforceable and provide notice to the franchisee of their rights and obligations under the new law. This follows a new Minnesota law invalidating non-compete agreements generally and provides Minnesota venue to any dispute regarding the activity restrictions.

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