Across State Lines

Minnesota's "Gotchas"

A multitude of legal quirks can trip up a Minnesota employer that ventures carelessly into other states, but companies moving into the Minnesota market should also take care. Never mind the obvious stuff, such as Minnesota is one of the minority of states that outlaw employment discrimination on the basis of sexual orientation. Twin Cities attorneys point to two obscure state statutes that can really catch outsiders by surprise.

Suppose a company fires an employee and pays a severance sum, in exchange for which the individual agrees to release all legal claims against the company. The Minnesota Human Rights Act give the person 15 days to rescind the agreement—and a unique provision requires that notice of the 15-day rescission period be written into the agreement in a certain way. Without that clause in the settlement agreement, the waiver of claims is invalid.

No problem, provided the employer is aware of the statute. But here is what it can mean for the unwary, says Minneapolis attorney John Thompson of Oberman Thompson & Segal, LLC: "A company can hand over $100,000 to an employee, the general counsel in New York writes the agreement without the rescission paragraph, and 15 days later the employee can use the $100,000 to finance a suit [against the company] under the Minnesota Human Rights Act."

The second "gotcha" involves highly unusual protections for manufacturers' and wholesalers' sales reps whose territory includes Minnesota and who work on a commission. For one thing, their contracts cannot be terminated during their terms without "good cause." And depending on the type of agreement, the company for which they have been selling may be required to continue  paying commissions for up to 180 days after notifying the rep that it intends to terminate the agreement.

What it boils down to is that even a company with good cause to fire a sales rep can wind up paying "trailing commissions" for as long as six months, explains attorney Michael Iwan of Dorsey & Whitney, LLC, in Minneapolis. If the rep deals in millions of dollars worth of merchandise, he points out, "that can mean hundreds of thousands of dollars."

There are ways to construct agreements with Minnesota sales reps so that out-of-state companies minimize their risk, Twin Cities attorneys say. But first a company has to know that the unusual statute exists. Due diligence pays—in Minnesota and everywhere else.

—J.G.