Banning Noncompetes is an Important First Step. But it isn’t Enough.
After a whirlwind few months, the Minnesota Legislature has completed its most productive session in decades. Amidst a plethora of significant victories for everyday people, the comprehensive new labor legislation stands out as a major step forward for working people.
Among other things, the massive labor law ensures paid sick leave for workers, moves workers in the nursing home industry one big step closer to sectoral bargaining, and provides construction workers with greater protections from wage theft.
It also bans noncompetes — provisions found buried in the fine print of employment contracts that prevent workers from seeking new employment opportunities when they have reason to leave their current workplace. This ban is a critical first step to ensuring that workers are empowered to exercise their power in the workplace.
However, the law is not enough. Corporate employers and their lawyers have long made clear that legislation alone won’t stop them from attempting to force workers to stay in jobs they no longer want. The Minnesota Bar Association and the Legislature can take some concrete steps to make sure the ban on noncompetes is given its full and meaningful effect.
While Minnesota is one of just a few states to enact a blanket ban on noncompetes, it is not the first. We can draw important lessons from states like California, where noncompetes have long been unenforceable. What we see is that workers — and low-wage workers in particular — are unlikely to know or act on the fact that the noncompete clause in their employment contract is unenforceable.
Research shows that employers include noncompete clauses in employment contracts even in places where that noncompete is unenforceable: In California, where state law forbids enforcement of noncompetes, one study found that over 45% of businesses nonetheless include noncompetes in employment contracts.
Workers — often not knowing the express terms are unenforceable — act as though they are bound by these noncompete clauses, turning down job offers and passing up opportunities to search for jobs with better pay or preferable working conditions. Workers lose chances to improve their quality of life because employer-side attorneys continue to exploit loopholes in existing protections from coercive contracts.
In California, a coalition of advocacy organizations — of which my organization, People’s Parity Project, is a part — has called on the attorney regulation agency, the Committee on Professional Responsibility and Conduct, to make clear that a lawyer who includes an illegal or unenforceable clause in an employment contract violates their ethical obligation to uphold the law of the state in which they practice. The Minnesota Lawyers Professional Responsibility Board can also make clear that any lawyer who assists their client in including noncompete clauses in employment contracts is engaging in deceptive and unethical practices, and thus risks discipline by the state bar.
If the bar association fails to act, the Legislature can step in. In California, the legislature is currently considering AB 747, which would enact financial penalties for employers who attempt to use noncompetes in violation of state law. It also clarifies that lawyers who support these employers’ efforts will be subjected to discipline up to and including disbarment.
Allowing unscrupulous, pro-corporate attorneys to effectively nullify duly enacted state law would severely undermine this session’s wins for workers, and the state bar association and the Legislature can both move quickly to prevent this from happening.
Unfortunately, we know that corporations and their lawyers won’t give up on their efforts to restrict workers’ freedom even if they are effectively prevented from including noncompetes in worker contracts. Employers have made clear that, without external incentives, they will choose to trap workers in their jobs through coercive contract terms, rather than incentivizing employee retention through higher wages and better working conditions. While noncompete clauses have been the dominant tool of choice for this coercion thus far, employer-side attorneys have grown increasingly creative in developing ways to disempower workers and limit their free mobility.
One emerging trend that the Legislature should be aware of is the growing prevalence of employer-driven debt, often taking the form of training repayment agreement provisions (TRAPs) and liquidated damages clauses in employment contracts. This employer-driven debt functions similarly to noncompete clauses, preventing workers from freely leaving their positions by making the cost of seeking alternative employment prohibitively high, particularly for low-wage workers. However, these arrangements are not outlawed under the just-passed legislation.
As David Seligman, executive director of Towards Justice recently testified to Congress, employer-driven debt regimes have emerged in response to “increased scrutiny of noncompete and other direct restraints on worker mobility.”
Corporate attorneys anticipated that states like Minnesota would take steps to protect workers, and have responded by creating new ways to oppress workers. The legislature can stay one step ahead of these companies and their lawyers, and act to ensure that the spirit of the newly passed legislation is fully enforced.
This legislative session saw big wins for working people in Minnesota. But the pro-corporate forces opposing workers in service of corporate profits aren’t going to retreat. They’ll be using this summer to strategize new ways to trap Minnesotan workers in subpar working conditions. Workers’ rights champions in the Legislature and beyond would do well to anticipate their next steps and make plans of their own to ensure that Minnesotans are truly able to claim their power in the workplace.