A manufacturer in Indiana or North Carolina signs a Minnesota independent rep to sell in the Upper Midwest. The agreement says either party may terminate on 30 days’ notice, with or without cause, and that the law of the manufacturer’s home state governs. Years later the manufacturer decides to go direct, sends the 30-day letter, and assumes it is done.
It is not done. Minnesota’s Termination of Sales Representatives Act, Minn. Stat. § 325E.37, applies to that relationship even though neither the contract nor the manufacturer’s counsel mentioned it, and since 2014 the choice-of-law clause the manufacturer wrote to avoid it has been void.
But the common description of the statute — “you can’t fire a Minnesota rep without good cause” — is not right either, and reps who plan around that version of the rule get an unpleasant surprise. The Act gives a principal two exits. One requires good cause. The other does not. What the Act really does is take away the contract’s short-notice, home-state-law exit and replace it with a longer, Minnesota exit.
Who is covered?
A “sales representative” is “a person who contracts with a principal to solicit wholesale orders and who is compensated, in whole or in part, by commission.” Minn. Stat. § 325E.37, subd. 1(d). “Person” is broad — it “means a natural person, but also includes a partnership, corporation, and all other entities.” Subd. 1(c).
Four categories are excluded. A sales representative does not include a person who:
- is an employee of the principal;
- places orders or purchases for the person’s own account for resale;
- holds the goods on a consignment basis for the principal’s account for resale; or
- distributes, sells, or offers the goods, other than samples, to end users, at retail.
Subd. 1(d)(1)–(4). Exclusion (4) reads “at retail” because of a 2017 amendment; before that it read “not for resale.” 2017 Minn. Laws ch. 24, § 1.
Two structural points about coverage are worth more than the list.
Status is measured at the moment of termination. In Midwest Sports Marketing, Inc. v. Hillerich & Bradsby of Canada, Ltd., 552 N.W.2d 254 (Minn. App. 1996), a manufacturer argued that its rep had been disqualified because it once held consignment goods. The Court of Appeals rejected the argument: “the essential inquiry is whether the person claiming to be a sales representative was a sales representative when the principal terminated the sales representative agreement. It is irrelevant whether the person was a sales representative of the principal in the past. Further, the statute precludes a person from being a sales representative if he or she ‘holds,’ not ‘held,’ goods on a consignment basis.” Id. at 264. The same case held that individual owners who never contracted with the manufacturer are not sales representatives of it, even if the manufacturer directed their work — the contract runs to the agency, and so does the claim. Id. at 263.
The geographic hook is generous. The Act applies to a rep who, “during some part of the period of the sales representative agreement,” either “(1) is a resident of Minnesota or maintains that person’s principal place of business in Minnesota; or (2) whose geographical territory specified in the sales representative agreement includes part or all of Minnesota.” Subd. 6(a). A Wisconsin agency with a territory that includes Minnesota is covered. So is a Minnesota rep whose Minnesota residence lasted only part of the term.
Door one: termination for good cause
Subdivision 2(a) is the provision everyone quotes:
A manufacturer, wholesaler, assembler, or importer may not terminate a sales representative agreement unless the person has good cause and: (1) that person has given written notice setting forth the reason(s) for the termination at least 90 days in advance of termination; and (2) the recipient of the notice fails to correct the reasons stated for termination in the notice within 60 days of receipt of the notice.
So the good-cause route is not merely notice — it is notice plus a cure right. If the rep fixes the stated problem inside 60 days, the termination does not happen. That makes the content of the notice letter decisive: a principal that writes a vague letter has given the rep nothing to cure and has arguably not complied.
“Good cause” is defined as “a material breach of one or more provisions of a written sales representative agreement,” or, if there is no written agreement, “failure by the sales representative to substantially comply with the material and reasonable requirements imposed by” the principal. Subd. 1(b). The statute then lists six things that count, prefaced by “includes, but is not limited to”: the rep’s bankruptcy or insolvency; an assignment for the benefit of creditors or similar disposition of business assets; voluntary abandonment of the business “as determined by a totality of the circumstances”; conviction or a guilty or no-contest plea to violating any law relating to the rep’s business; any act materially impairing the goodwill associated with the principal’s marks; and failure to forward customer payments. Subd. 1(b)(1)–(6).
Those six carry a procedural consequence: “A notice of termination is effective immediately upon receipt where the alleged grounds for termination are the reasons set forth in subdivision 1, paragraph (b), clauses (1) to (6).” Subd. 2(b). No 90 days, no cure period. Everything else — including a garden-variety material breach — runs the full 90-plus-60 track.
Note what is not good cause. Declining sales in a bad year. A corporate decision to convert to an in-house sales force. A merger. A rep who will not sell the agency at the price the manufacturer wants. Those are business reasons, not statutory good cause, which is why the second door matters so much.
Door two: non-renewal, no cause required
Subdivision 3 is the provision manufacturers’ counsel should read first and the one reps most often miss:
Unless the failure to renew a sales representative agreement is for good cause, and the sales representative has failed to correct reasons for termination as required by subdivision 2, no person may fail to renew a sales representative agreement unless the sales representative has been given written notice of the intention not to renew at least 90 days in advance of the expiration of the agreement. For purposes of this subdivision, a sales representative agreement of indefinite duration shall be treated as if it were for a definite duration expiring 180 days after the giving of written notice of intention not to continue the agreement.
The Court of Appeals read that exactly the way it sounds: “subdivision 3 permits a principal to end a sales representative agreement of indefinite duration, without cause, by giving 180 days’ written notice.” Midwest Sports Marketing, 552 N.W.2d at 265.
That is the honest answer to “can they fire me without cause?” Yes — if the agreement is of indefinite duration and they are willing to pay you to sell for six more months. The Act does not create job security. It creates runway, and it converts a 30-day contractual exit into a 180-day statutory one.
It also explains why the Act survived a Contract Clause challenge in Midwest Sports Marketing. The manufacturer argued the Act unconstitutionally impaired a 1985 agreement. The court held the impairment was not substantial precisely because the contract already required notice and “[t]he statute merely requires a 90-day longer notice period.” Id. Because there was no substantial impairment, the court did not reach whether the state had a significant and legitimate public purpose. Id.
What has to be paid on the way out
Subdivision 4 answers the commission question in one sentence:
If a sales representative is paid by commission under a sales representative agreement and the agreement is terminated, the representative is entitled to be paid for all sales as to which the representative would have been entitled to commissions pursuant to the provisions of the sales representative agreement, made prior to the date of termination of the agreement or the end of the notification period, whichever is later, regardless of whether the goods have been actually shipped.
Three things to extract. The measure is what the agreement would have paid — the statute does not invent a commission rate. The cutoff is the later of termination or the end of the notification period, which means a principal that shortchanges the notice period does not shorten the commission tail. And shipment is irrelevant, which is the opposite of the rule under the prompt-payment statute for commission salespeople.
Timing of payment routes back to that other statute: “Payment of commissions due the sales representative shall be paid in accordance with the terms of the sales representative agreement or, if not specified in the agreement, payments of commissions due the sales representative shall be paid in accordance with section 181.145.” Subd. 4. That import matters, because § 181.145 carries a daily penalty capped at the entire unpaid balance and a mandatory fee award. See unpaid commissions under § 181.145 for how that penalty is computed and for the two-year/six-year limitations split that governs it.
The anti-waiver provision — and the date that limits it
Here is the part that decides most cases involving an out-of-state manufacturer.
Subdivision 7 provides that no principal “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.” Any such term “is void and unenforceable.” Subd. 7(b).
That was not always the law, and the before-picture is instructive. In Hagstrom v. American Circuit Breaker Corp., 518 N.W.2d 46 (Minn. App. 1994), a North Carolina manufacturer terminated a Minnesota partnership on the 30 days’ notice its contract required, under a clause choosing North Carolina law. The Court of Appeals enforced the choice-of-law clause and let the termination stand, notwithstanding § 325E.37’s 90-day requirement. Its reasoning was that the legislature had amended the Franchise Act in 1989 to void choice-of-law clauses but wrote no such provision into the Sales Representative Act a year later: “The legislature could have included such a provision, but did not.” Id. at 49. For twenty years, that was the escape hatch.
The legislature closed it. Subdivision 7 was added by 2014 Minn. Laws ch. 165, § 1, effective August 1, 2014, “and applies to sales representative agreements entered into, renewed, or amended on or after that date.” The venue clause was added by 2022 Minn. Laws ch. 51, § 1, effective August 1, 2022, with the same applicability language. Both effective-date provisions live in the session laws and do not appear in the codified statute — a reader working only from the Revisor’s page will not see them.
Which raises the question that decides the case: what does “renewed” mean for an agreement of indefinite duration signed years before 2014?
The answer comes from a 1991 amendment that also never made it into the codified section. Section 2(a) of that act says an agreement is renewed if either “(1) the period specified in the agreement has expired or expires, but the relationship has continued or continues, either for a new specified period or for an indefinite period; or (2) the agreement is for an indefinite period, and with the principal’s consent or acquiescense, the sales representative solicits orders on or after the effective date.” 1991 Minn. Laws ch. 190, § 2(a) (misspelling in the original). In New Creative Enterprises, Inc. v. Dick Hume & Associates, Inc., 494 N.W.2d 508 (Minn. App. 1993), the Court of Appeals treated that definition as a clarification of a term the 1990 Act had left undefined and applied it to a 1986 agreement. Id. at 511.
The Eighth Circuit carried that forward to the anti-waiver provision. In Engineered Sales, Co. v. Endress + Hauser, Inc., No. 19-1671 (8th Cir. Nov. 17, 2020), a Minnesota rep and an Indiana manufacturer had signed an indefinite-duration agreement in 2001 with an Indiana choice-of-law clause. The district court held the 2014 amendment did not reach it because the agreement had never been “renewed.” The Eighth Circuit reversed, holding that the 1991 definition governs throughout the Act, that the rep’s continued solicitation of orders with the manufacturer’s consent or acquiescence after August 1, 2014 renewed the agreement, and that the Indiana choice-of-law provision was therefore “void and unenforceable under Minn. Stat. § 325E.37, subd. 7.” It remanded for a determination whether the manufacturer had good cause. Chief Judge Smith dissented, reading the 1991 applicability language as limited to the 1991 revisions.
The practical effect: for any rep relationship that was still actively producing orders after August 1, 2014, the manufacturer’s out-of-state choice-of-law clause is very likely dead. For an agreement that was dormant — no solicitation, no consent, no acquiescence — the analysis is harder and Hagstrom still describes Minnesota’s general willingness to honor choice-of-law clauses outside the Act’s reach. See what you cannot export by choosing another state’s law.
Arbitration that runs one direction
Subdivision 5 contains something rarely seen in Minnesota commercial statutes: an arbitration clause that binds only the stronger party.
The sole remedy for a manufacturer, wholesaler, assembler, or importer who alleges a violation of any provision of this section is to submit the matter to arbitration. A sales representative may also submit a matter to arbitration, or in the alternative, at the sales representative’s option prior to the arbitration hearing, the sales representative may bring the sales representative’s claims in a court of law, and in that event the claims of all parties must be resolved in that forum.
Subd. 5(a). The manufacturer must arbitrate. The rep chooses — and the rep’s choice drags every party’s claims into the chosen forum. The option must be exercised before the arbitration hearing.
If the parties do not agree on an arbitrator within 30 days after the sales representative demands arbitration in writing, either party may ask the American Arbitration Association to appoint one; if the AAA declines, the arbitration proceeds under chapter 572B. Costs are borne equally “unless the arbitrator determines a more equitable distribution.” Subd. 5(a).
The remedies the arbitrator may award are enumerated in subdivision 5(b): sustaining the termination; reinstating the agreement, or damages; payment of commissions due under subdivision 4; reasonable attorneys’ fees and costs to a prevailing sales representative; reasonable attorneys’ fees and costs to a prevailing principal “if the arbitrator finds the complaint was frivolous, unreasonable, or without foundation”; and the arbitrator’s full fees and expenses against a party whose resort to or defense in arbitration “was vexatious and lacking in good faith.”
Read those fee provisions side by side. A prevailing rep gets fees for prevailing. A prevailing manufacturer gets fees only on a finding that the claim was frivolous. That asymmetry is deliberate and it is the single most useful fact for a rep deciding whether the claim is worth pursuing.
Subdivision 5(c) makes the arbitration decision “final and binding” and directs that “[t]he district court shall, upon application of a party, issue an order confirming the decision.” An earlier version of that paragraph went further and precluded judicial review altogether; the Court of Appeals held that unconstitutional as a denial of due process and severed it, holding that “statutes providing for compulsory binding arbitration of disputes must also provide a minimal level of judicial review of the arbitration process and award.” New Creative Enterprises, 494 N.W.2d at 513. Anyone reading a pre-1993 version of the Act should know that provision is gone.
For how Minnesota courts treat arbitration clauses generally, see what a party can resist in arbitration.
One year, and it runs from termination
To be effective, any demand for arbitration under subdivision 5 must be made in writing and delivered to the principal on or before one year after the effective date of the termination of the agreement.
Subd. 6(b). One year from the effective date of termination — not from discovery, not from the last unpaid commission.
The statute writes that deadline as a limit on the arbitration demand. It does not, in terms, say the same about a rep who elects the court option under subdivision 5(a). Do not build a case on that gap. The prudent course is to treat one year from the effective termination date as the outer limit for asserting any claim under this section, and to preserve the separate commission claims — which run on their own, longer clocks — as independent counts.
There is also a narrower, older anti-waiver provision aimed at one industry: a contract term between “a sales representative dealing in plumbing equipment or supplies and a principal” that purports to waive any provision of Laws 2007, chapters 135 or 140, “whether by express waiver or by a provision stipulating that the contract is subject to the laws of another state, shall be void.” Subd. 6(c). That predates the general anti-waiver rule in subdivision 7 and remains on the books.
What the Act does not do
It does not protect employees. Subdivision 1(d)(1) excludes them, and an employed salesperson’s remedies come from the final-paycheck statutes instead.
It does not protect distributors who buy for their own account, consignees, or anyone selling to end users at retail. Subd. 1(d)(2)–(4).
It does not create a franchise relationship. A rep who wants the broader protections of the Minnesota Franchise Act has to satisfy that statute’s own definitions — see the Minnesota Franchise Act.
And it does not, by itself, reach the competitor who took the territory. That is a separate theory with separate elements — see tortious interference claims in Minnesota.
Madgett Law, LLC
Madgett Law, LLC represents independent sales representatives and manufacturers’ agencies in terminations governed by Minn. Stat. § 325E.37, and advises principals on how to end a rep relationship without buying a claim. The two facts that most often decide these cases are settled early and cheaply: whether the agreement is of definite or indefinite duration, and whether the rep solicited orders with the principal’s consent or acquiescence after August 1, 2014. If you have received a termination letter — or are about to send one — call 612-470-6529 or send us a message. The one-year arbitration-demand deadline in subdivision 6(b) is short.
Sources: Minn. Stat. § 325E.37, subd. 1(b) (definition of “good cause”; six enumerated grounds), subd. 1(c) (“person”), subd. 1(d) (definition and four exclusions), subd. 1(e) (sales representative agreement), subd. 2(a) (good cause plus 90 days’ notice plus 60-day cure), subd. 2(b) (immediate effectiveness for clauses (1) to (6)), subd. 3 (non-renewal; 90 days before expiration; indefinite agreements treated as expiring 180 days after notice), subd. 4 (commissions through termination or end of notification period, whichever is later, regardless of shipment; payment per agreement or per § 181.145), subd. 5(a) (arbitration as the principal’s sole remedy; representative’s option to sue; 30-day arbitrator selection; chapter 572B; cost sharing), subd. 5(b) (six enumerated remedies including one-way fee shifting), subd. 5(c) (final and binding; district court confirmation), subd. 6(a) (Minnesota residence, principal place of business, or territory), subd. 6(b) (one-year written arbitration demand), subd. 6(c) (plumbing equipment waiver void), subd. 7 (choice of law, choice of venue, and waiver void and unenforceable). Minn. Stat. § 181.145 (prompt payment of commissions, incorporated by § 325E.37, subd. 4). 2014 Minn. Laws ch. 165, § 1 (adding subd. 7; effective August 1, 2014, applicable to agreements entered into, renewed, or amended on or after that date). 2022 Minn. Laws ch. 51, § 1 (adding choice of venue to subd. 7; effective August 1, 2022, same applicability). 2017 Minn. Laws ch. 24, § 1 (amending subd. 1(d)(4) from “not for resale” to “at retail”). Midwest Sports Marketing, Inc. v. Hillerich & Bradsby of Canada, Ltd., 552 N.W.2d 254, 262, 264, 265 (Minn. App. 1996) (rep must contract with and be paid by the principal; status measured at termination; subd. 3 permits no-cause termination of an indefinite agreement on 180 days’ notice; Contract Clause challenge rejected for lack of substantial impairment). 1991 Minn. Laws ch. 190, § 2(a)(1)–(2) (definition of “renewed” for agreements of expired-but-continued and indefinite duration). Hagstrom v. American Circuit Breaker Corp., 518 N.W.2d 46, 49 (Minn. App. 1994) (pre-2014 law: choice-of-law clause enforced because the Act contained no provision restricting such clauses). New Creative Enterprises, Inc. v. Dick Hume & Associates, Inc., 494 N.W.2d 508, 511, 513 (Minn. App. 1993) (1991 definition of “renewed” applied as a clarification; provision precluding judicial review of compulsory arbitration held unconstitutional and severed). Engineered Sales, Co. v. Endress + Hauser, Inc., No. 19-1671 (8th Cir. Nov. 17, 2020) (slip op.) (indefinite-duration agreement “renewed” by post-August 1, 2014 solicitation with the principal’s consent or acquiescence; Indiana choice-of-law provision void under subd. 7; Smith, C.J., dissenting).
This article is general legal information about Minnesota law. It is not legal advice, it does not create an attorney–client relationship, and no outcome is promised or implied. Statutes and case law change; verify current text before relying on any provision discussed here.