Minnesota Recently Amended its Termination of Sales Representatives Act

The Minnesota legislature enacted the Minnesota Termination of Sales Representative Act to give certain rights to sales representatives and provide some ground rules to govern the relationship between manufacturers and sales representatives with territories in Minnesota.

Minnesota Statute § 325E.37, Minnesota Termination of Sales Representative Act (“TSA”), controls both express and implied contract, oral and written contracts, and contracts with no fixed duration.

Under the TSA, a “sales representative” means someone who contracts with a principal to solicit wholesale orders and who is compensated, in whole or in part, by commission.

The TSA also limits when a sales representative can be terminated. Under the TSA, a sales person cannot be terminated without “good cause” and only after a 90-day notice period and a 60-day “cure” period. If the sales person is able to correct the reason for possible termination, then the manufacturer is prohibited from firing the sales representative. “Good case” means,

[A] material breach of one or more provisions of a written sales representative agreement governing the relationship with the manufacturer, wholesaler, assembler, or importer, or in absence of a written agreement, failure by the sales representative to substantially comply with the material and reasonable requirements imposed by the manufacturer, wholesaler, assembler, or importer.

Minn. Stat. § 325E.37, subd. 1(a). And, the statute goes on to state that “good cause includes, but is not limited to”:

(1) The bankruptcy or insolvency of the sales representative;

(2) Assignment for the benefit of creditors or similar disposition of the assets of the sales representative’s business;

(3) The voluntary abandonment of the business by the sales representative as determined by the totality of the circumstances;

(4) Conviction or a plea of guilty or no contest to a charge of violating any law relating to the sales representative’s business;

(5) Any act of the sales representative which material impaires the good will associated with the manufacturer’s, wholesaler’s, assembler’s, or importer’s trademark, trade name, service mark, logotype, or other commercial symbol; or

(6) Failure to forward customer payments to the manufacturer, wholesaler, assembler, or importer.

Id., subd. 1(b).

Previous to the change in this statute, manufacturers were able to circumvent this law by drafting into the agreement a “choice-of-law” provision of a different state, which would mean that Minnesota’s TSA would not apply to the agreement. To address this issue, there is new language in Minn. Stat. § 325E.37, which states,

Subd. 7. Prohibition of inclusion of certain unfair contract terms in sales representative agreement. (a) No manufacturer, wholesaler, assembler, or importer shall circumvent compliance with this section by including in a sales representative agreement a term or provision, whether express or implied, that includes or purports to include:

(1) an application or choice of law of any other state; or

(2) a waiver of any provision of this section.

(b) Any term or provision described in paragraph (a) is void and unenforceable.

Id., sub. 7. This change went into effect on August 1, 2014.

This article was written by attorney Maureen A. Carlson.

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