November 29, 2022
Before You Terminate Your Minnesota Sales Rep...
Local laws can make things more involved than a simple 30-day-notice termination letter
Considering all the lighting manufacturers and sales agents that serve various lighting markets in the US and Canada, there are tens of thousands of active sales representative agreements occupying computer hard drives and filing cabinets of lighting people throughout the industry.
Terminating a sales representative agreement is usually a decision that is taken seriously by any involved party – but when a manufacturer is the one initiating the divorce – and the contract is governed by Minnesota law, there are some additional statutes that manufacturers should know. With Minnesota often being the corporate hub for sales agents that also cover the Dakotas and Wisconsin, Minnesota law can often impact manufacturers’ business practices throughout a large chunk of the Upper Midwest United States.
A 2022 lawsuit filed by lighting agent Mlazgar Associates against a major lighting manufacturer highlights the nuances of the agent-friendly Minnesota law and how it can cause a manufacturer-rep breakup to morph into something contentious and litigious.
The Minnesota Termination of Sales Representatives Act (MTSRA)
Enacted in 1990, MTSRA restricts a manufacturer from terminating a sales representative agreement unless it has good cause, provides written notice of the reasons for the termination 90 days in advance, and allows the sales representative 60 days to correct the reasons that were given to justify the termination. The act’s protections apply to independent sales representatives who reside in Minnesota, have their primary place of business in Minnesota, or are responsible for a territory that includes all or part of Minnesota. Upon the termination of a sales representative agreement, MTSRA requires the payment of outstanding commissions.
As originally drafted, parties to sales representative agreements could avoid the MTSRA’s requirements through choice-of-law provisions. However, in 2014, the Minnesota legislature amended the statute to add Subdivision 7, an anti-waiver provision. The anti-waiver provision states that a manufacturer may not “circumvent compliance” by including “an application or choice of law of any other state” or “a waiver of any provision” of the act.
Months ago, MTSRA was amended once again to offer more protections for sales reps as detailed below by Craig W. Trepanier, a Minnesota sales representative attorney:
Minnesota has amended the Minnesota Termination of Sales Representatives Act (“MTSRA”), again.
Author: Craig W. Trepanier, Trepanier MacGillis Battina, P.A.
Minnesota Statutes Section 325E.37, subdivision 7, has been amended to read as follows:
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;
(2) a choice of venue in any other state; or
(3) a waiver of any provision of this section.
(b) Any term or provision described in paragraph (a) is void and unenforceable.
(The new language is in bold italics). The amendment is intended to protect sales reps from being forced to litigate claims in another state where a court might not apply Minnesota law.
The Minnesota Termination of Sales Representatives Act
The Minnesota Termination of Sales Representative Act , Minn. Stat. § 325E.37, provides legal protections for independent contractor sales representatives who reside in, or whose sales territory includes, the State of Minnesota. This includes protection against termination of oral or written contracts between the sales representative and its principal, usually a manufacturer.
The Act only applies to a sales rep “who contracts with a principal to solicit wholesale orders and who is compensated, in whole or in part, by commission.” Subd. 1(c). A “person,” as defined by the Act, includes natural persons, partnerships, corporations, and all other entities. Subd. 1(d). However, the Act does not cover a person who: (1) is an employee (not an independent contractor); (2) purchases goods for the person’s own account for resale; (3) holds goods on a consignment basis for the principal’s account for resale; or (4) solicits orders for sale to an “end user,” rather than for resale. Subd. 1(d)(1-4).
The MTSRA was last amended in 2017 to clarify its application to reps who sell to companies that incorporate components into other products.
The changes become effective August 1, 2022, and applies to sales representative agreements entered into, renewed, or amended after that date.
Although seemingly modest, this change makes it even more difficult for manufacturers to avoid application of the MTSRA. If you have questions about the Minnesota Termination of Sales Representatives Act, contact the Minnesota sales rep attorneys at Trepanier MacGillis Battina, P.A.
About the Author
Craig W. Trepanier is a Minnesota sales representative attorney who handles disputes under the Minnesota Termination of Sales Representatives Act. He can be reached at email@example.com or at 612-455-0502.