Minnesota Has Been Quietly Making Contract Terms Non-Exportable Since 1973. Four Statutes Later, It Is a Drafting Rule — Not a List of Exceptions.

Most Minnesota lawyers know that the 2023 non-compete statute closed the Delaware-choice-of-law workaround. Many know that construction contracts performed here cannot be shipped to another state’s courts. Fewer connect those two facts to a franchise statute from 1973 and a sales-representative statute from 2014.

They are the same move, made four times over fifty years.

The governing-law clause is treated in most drafting practice as a term like any other — negotiable, tradeable, worth a concession elsewhere. In an identifiable and growing set of Minnesota contracts, it is not a term at all. It is void on the face of a statute, regardless of what the parties agreed, how sophisticated they were, or what they got in exchange. And in the largest exposures a business faces, the clause never bound the person suing you in the first place.

Four statutes, one pattern

Nothing suggests these were enacted as a program. They came from four different legislatures, four different lobbies, and four different problems. But the through-line is consistent enough to be predictive: where Minnesota concludes that one side of a recurring contract type has no real bargaining power over the boilerplate, it removes the forum and choice-of-law terms from the negotiable set entirely.

The oldest one is the broadest, and it is fifty years old

Minn. Stat. § 80C.21 is a single sentence, and it is worth reading in full because most people have never seen it:

Any condition, stipulation or provision, including any choice of law provision, purporting to bind any person who, at the time of acquiring a franchise is a resident of this state, or, in the case of a partnership or corporation, organized or incorporated under the laws of this state, or purporting to bind a person acquiring any franchise to be operated in this state to waive compliance or which has the effect of waiving compliance with any provision of sections 80C.01 to 80C.22 or any rule or order thereunder is void.

Note the reach. It covers Minnesota residents and Minnesota-organized entities and anyone acquiring a franchise “to be operated in this state” — so an out-of-state franchisee opening a Minnesota location is inside it. And it voids not only express waivers but provisions “which ha[ve] the effect of waiving compliance,” which is what a choice-of-law clause pointing at a state without a franchise act does.

Minnesota drew this line in 1973. The 2023 non-compete statute is not a departure. It is the fourth iteration.

Construction: the statute that names arbitration out loud

Minn. Stat. § 337.10, subd. 1, in its entirety:

Provisions contained in, or executed in connection with, a building and construction contract to be performed in Minnesota making the contract subject to the laws of another state or requiring that any litigation, arbitration, or other dispute resolution process on the contract occur in another state are void and unenforceable.

Two things to notice.

First, the trigger is where the work happens, not who the parties are. “[T]o be performed in Minnesota” — not “between Minnesota parties,” not “with a Minnesota contractor.” A Texas general contractor and a Wisconsin subcontractor building in Rochester are inside the statute.

Second, the subdivision names arbitration explicitly and treats it identically to litigation and “other dispute resolution process.” That parallel structure is either the statute’s constitutional strength or its constitutional weakness, depending on which way the preemption question comes out. More on that below. For the rest of chapter 337’s void-clause provisions — indemnity, lien waiver, prompt payment — see The Clauses Minnesota Voids in Construction Contracts.

Sales representatives: the anti-circumvention drafting

Minn. Stat. § 325E.37, subd. 7, added in 2014 and amended in 2022, is the most explicitly anti-evasive of the four:

(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.

“[W]hether express or implied” is unusual language, and the framing verb — “circumvent compliance” — tells you what the Legislature thought the clause was for.

Non-competes: the newest, and the one with the tightest limits

Minn. Stat. § 181.988, subd. 3(a) provides that an employer must not require an employee “who primarily resides and works in Minnesota,” as a condition of employment, to agree to a provision that would “(1) require the employee to adjudicate outside of Minnesota a claim arising in Minnesota; or (2) deprive the employee of the substantive protection of Minnesota law with respect to a controversy arising in Minnesota.” A violating provision is voidable at any time by the employee, and if voided, “the matter shall be adjudicated in Minnesota and Minnesota law shall govern the dispute.” Subd. 3(b). And subdivision 3(d): “For purposes of this section, adjudication includes litigation and arbitration.”

Both of the statute’s limits are real, and both are on its face.

• “[R]esides and works” is conjunctive. A person who lives in Hudson and works in St. Paul, or lives elsewhere and works remotely for a Minnesota employer, does not fit the description as written.
• Subdivision 3(e): “This subdivision applies only to claims arising under this section.” This is not a general Minnesota choice-of-law statute. A wage claim, a discrimination claim, or a trade-secret claim under the same agreement is governed by ordinary conflicts analysis.

That second limit is the one most often overstated in summaries of the 2023 act. For the full statute, its two exceptions, and the pre-July-2023 common-law rules, see Is My Non-Compete Enforceable in Minnesota?.

The clause that never bound your biggest plaintiff anyway

Here is the part of the analysis that has nothing to do with any statute, and that matters more than all four of them in most businesses.

A choice-of-law clause is a contract term. It binds the parties to the contract. The person who sues you over a defective product, a workplace injury, or a predecessor’s liability did not sign your asset purchase agreement, your supply contract, or your terms of sale. Nothing in those documents allocates anything as to that plaintiff.

When that plaintiff sues in Minnesota, the governing law is decided by Minnesota’s conflicts analysis, not by the deal documents. Minnesota resolves it by asking, after finding an actual conflict that either state may constitutionally resolve, the five choice-influencing considerations. Jepson v. General Casualty Co. of Wisconsin, 513 N.W.2d 467, 470 (Minn. 1994):

[W]e next look to the five choice influencing factors set out in Milkovich v. Saari, 295 Minn. 155, 203 N.W.2d 408 (1973). They are: (1) predictability of result; (2) maintenance of interstate and international order; (3) simplification of the judicial task; (4) advancement of the forum’s governmental interest; and (5) application of the better rule of law.

And the court was pointed about how that framework is to be used: “These factors were not intended to spawn the evolution of set mechanical rules but instead to prompt courts to carefully and critically consider each new fact situation and explain in a straight-forward manner their choice of law.” Id.

So the exposures that keep business owners awake — tort liability, product liability, successor liability to a predecessor’s claimants — were never portable. Not because a Minnesota statute voided the clause. Because the clause was never addressed to those people. A great deal of contract drafting proceeds as though a governing-law provision were a shield against the world. It is a shield against your counterparty.

The live question at the edge: the Federal Arbitration Act

This is genuinely unsettled, and it should be presented that way.

Section 2 of the FAA, 9 U.S.C. § 2, provides that a written arbitration provision in a maritime transaction or “a contract evidencing a transaction involving commerce . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract or as otherwise provided in chapter 4.”

The Supreme Court has read that savings clause narrowly in one specific direction. In Doctor’s Associates, Inc. v. Casarotto, 517 U.S. 681 (1996), the Court struck a Montana statute requiring notice of an arbitration clause on the first page of a contract. At 687:

Courts may not, however, invalidate arbitration agreements under state laws applicable only to arbitration provisions. . . . By enacting §2, we have several times said, Congress precluded States from singling out arbitration provisions for suspect status, requiring instead that such provisions be placed “upon the same footing as other contracts.”

The same page draws the contrast: “generally applicable contract defenses, such as fraud, duress, or unconscionability, may be applied to invalidate arbitration agreements without contravening §2.” And at 688 the Court explained why Montana’s statute failed the test — it “places arbitration agreements in a class apart from ‘any contract,’ and singularly limits their validity.”

Now apply that to § 337.10, subd. 1, and notice that the argument runs both ways.

The preemption argument: the subdivision names arbitration and voids an agreement to arbitrate in Illinois. That is a state law telling parties their arbitration agreement is unenforceable as written. Where the construction contract evidences a transaction involving commerce, § 2 says it “shall be valid, irrevocable, and enforceable,” and Minnesota has not identified a ground that exists “for the revocation of any contract.”

The savings argument: § 337.10, subd. 1 does not single arbitration out. It voids out-of-state law and out-of-state forum clauses across litigation, arbitration, or other dispute resolution process, identically. That is the opposite of the Montana defect — arbitration is not placed “in a class apart”; it is placed in exactly the same class. And the statute does not say the parties may not arbitrate. It says the arbitration may not be required to occur in another state.

We have not located a published Minnesota appellate decision or Eighth Circuit decision squarely resolving whether § 337.10, subd. 1 is preempted as applied to an arbitration provision covered by the FAA. Treat it as an open question. If your dispute-resolution strategy depends on the answer — in either direction — that is a question to brief, not to assume. The same tension exists for § 181.988, subd. 3(d), which likewise sweeps arbitration into its definition of “adjudication,” and for the arbitration-related provisions of § 325E.37.

For how the FAA operates against consumers in Minnesota, see The Federal Arbitration Act and Minnesota Consumers.

What should I actually do?

If you are drafting for a Minnesota-facing business:

1. Stop treating the governing-law clause as a bargaining chip in the four covered categories. In a franchise, a construction contract performed here, a sales representative agreement, or a Minnesota employment agreement, the clause you traded something for may be void by statute. You paid for nothing.
2. Check the trigger, not the label. Each of these statutes has a different hook — franchise “to be operated in this state,” construction contract “to be performed in Minnesota,” a sales representative agreement, an employee who “primarily resides and works” here. Two of them do not require a Minnesota party at all.
3. Do not extrapolate. Section 181.988, subd. 3(e) says in terms that it “applies only to claims arising under this section.” None of these four statutes is a general anti-choice-of-law rule, and there is no fifth statute that covers ordinary commercial contracts.
4. Price the arbitration question honestly. If you are relying on an out-of-state arbitration seat in a Minnesota construction contract, you are relying on an unresolved preemption argument. That may be a good bet. It is not a settled one, and it should not be described to a client as one.

If you are on the receiving end of a national form:

1. Read the forum and law clauses first. They are the cheapest thing in the document to be wrong about and the most expensive thing to litigate.
2. A clause being void does not make the rest of the contract void. These statutes strike provisions, not agreements.
3. If you are being sued in tort by someone who never signed anything, the clause is irrelevant to that case. Do not let a Delaware governing-law provision drive your assessment of a product liability claim in Hennepin County.

The observation

The conventional framing treats each of these statutes as a carve-out — a special-interest exception to the general freedom of contract. That framing predicts nothing, because it treats the next one as unforeseeable.

The better framing is that Minnesota has been building, one industry at a time, a category of non-exportable subject matter: fields in which the state has concluded that the substantive protection it enacted would be worthless if the counterparty could relocate the dispute. Once you accept that this is what the Legislature is doing, the fifty-year spread from franchises to non-competes stops looking random. It looks like a policy with a clear internal logic — enact a protection, then close the door the protection would otherwise walk out of.

There is a second, quieter lesson underneath it. The reason these statutes exist is that a choice-of-law clause is powerful against the person who signed it. That is precisely why it does nothing about the exposures where nobody signed anything. Businesses systematically over-invest in the clause and under-invest in the conflicts analysis that will actually decide the case that hurts them.

Madgett Law, LLC advises Minnesota businesses on contract terms, forum and choice-of-law disputes, construction contract compliance, and litigation over out-of-state agreements. If you are drafting, negotiating, or fighting about where a dispute belongs, send us a message or call 612-470-6529.

Sources: Minn. Stat. § 80C.21 (waivers void; choice of law), enacted 1973 c 612 s 21, amended 1989 c 198 s 2; § 337.10, subd. 1 (application of laws of another state), enacted 1997 c 127 s 1; § 325E.37, subd. 7 (prohibition of inclusion of certain unfair contract terms), new 2014 c 165 s 1, amended 2022 c 51 s 1; § 181.988, subd. 3(a)–(e) (choice of law; venue), enacted 2023 c 53 art 6 s 1 — all from the Minnesota Office of the Revisor of Statutes, 2025 Minnesota Statutes. Chapters 80C, 181, 325E, and 337 checked against the Revisor’s Table 2 (Statutes Affected by Session Laws) for the 2025 Regular and 1st Special Session and the 2026 Regular Session; none of the provisions cited above was amended in either session. Jepson v. General Casualty Co. of Wisconsin, 513 N.W.2d 467, 470 (Minn. 1994) (five choice-influencing considerations from Milkovich v. Saari, 295 Minn. 155, 203 N.W.2d 408 (1973)), quoted from the Harvard Caselaw Access Project scan of the official North Western Reporter, Second Series (static.case.law). 9 U.S.C. § 2, Legal Information Institute, Cornell Law School (reflecting the Pub. L. 117-90 amendment of March 3, 2022). Doctor’s Associates, Inc. v. Casarotto, 517 U.S. 681, 687, 688 (1996), quoted from the Harvard Caselaw Access Project scan of the official United States Reports (static.case.law).

This article is general legal information about Minnesota and federal law, not legal advice, and reading it does not create an attorney–client relationship. Whether any of these statutes reaches a particular agreement depends on the contract type, where performance occurs, and the parties involved. The Federal Arbitration Act preemption question discussed above is expressly identified as unresolved and should not be relied on as settled in either direction. No outcome is promised or implied.