Legislative intern tells Commerce committee few states limit franchise noncompete agreements; Indiana, Minnesota stand out

At a meeting of the House Committee on Commerce and Economic Development on April 11, legislative intern Helen R. Graves told members that few states have explicit limits on noncompete agreements for franchise relationships, with Indiana and Minnesota among the exceptions.

Graves said Indiana “essentially bans non compete clauses for franchises for a period longer than 3 years” and that Minnesota’s statute treats enforcement of unreasonable covenants not to compete after a franchise relationship ends as “unfair and inequitable.” She added that California’s law stands out for requiring employers to notify affected employees by Feb. 14, 2024, and for applying the statute when an employee lives and works in California even if the contract was signed elsewhere.

The briefing provided factual background ahead of committee work on noncompete legislation. A committee member said the panel will review noncompete-related legislation in the coming weeks so members have “good background information.”

Graves described common features across state statutes: duration limits are rare but do appear (Indiana at three years, Louisiana at two years), exceptions frequently include sale of the goodwill of a business and partnership dissolutions, and many laws preserve protections for trade secrets. She also noted procedural limits in Indiana, where a franchisee who renewed an affected agreement may bring an action to recover damages or seek reformation but cannot bring suit more than two years after an alleged violation.

Committee members asked follow-up questions about whether statutes distinguish by employee role or salary level; Graves said some statutes set salary thresholds and she would investigate role-based distinctions and case law and return next week with additional examples. She also told members she is still collecting state case law but that judicial materials have been harder to access than statutes.

The committee did not take formal action during the briefing. Members directed staff to continue compiling statutory language and cases to inform upcoming deliberations on noncompete measures.

The committee’s next steps include taking up noncompete-related legislation in the weeks ahead and reviewing the additional material Graves said she will deliver.