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FirstService drops noncompete agreement for workers as Legislature considers ban


FirstService drops noncompete agreement for workers as Legislature considers ban

Feb 07, 2023 | 5:31 pm ET
By Max Nesterak
FirstService drops noncompete agreement for workers as Legislature considers ban
Kevin Borowske says he and his wife were fired by FirstService Residential as caretakers of Centre Village condominiums in downtown Minneapolis for organizing for a union. Courtesy photo.

FirstService Residential, the largest property management company in North America, told its employees in Minnesota on Monday it would not enforce the noncompete agreements in its contracts with caretakers, desk attendants and other hourly workers.

The announcement came days after a caretaker at a Minneapolis condo building managed by FirstService went public with his story of being bound by a noncompete. Kevin Borowske, who was a caretaker with his wife at Centre Village for eight years, was fired in January after leading a class-action wage theft lawsuit against the company and leading a unionization effort.

Borowske said the company told him they would not enforce the noncompete agreements in his and his wife’s contracts last week before dropping them for all Minnesota hourly workers.

In a letter obtained by the Reformer, the company’s human resources director cited the Federal Trade Commission’s recently proposed rule banning noncompete agreements.

“We believe that this change is in alignment with our company values and is in the best interest of our team members,” Karen Stenoien wrote in the letter to FirstService workers.

The letter is addressed to hourly workers in Minnesota. An email to FirstService seeking comment and asking if noncompete agreements would be enforced elsewhere in the country was not returned.

Minnesota lawmakers weigh ban on noncompete agreements

Minnesota lawmakers took up a bill (SF405) on Tuesday that would make noncompete agreements unenforceable in the state.

Democrats in the Senate Labor Committee passed the bill on a party-line vote and referred the bill to the Senate’s judiciary committee, while the House is considering a companion bill.

Sen. Alice Mann, DFL-Edina, said she authored a similar bill in 2020 banning noncompete agreements in health care after hearing from workers who left one Duluth hospital but were unable to go work at the other hospital.

That bill stalled, but Mann said she received a flood of calls from people at all levels of the labor market, from McDonald’s workers to hair stylists to executives who were similarly constrained.

That led her to expand the scope of the bill from voiding noncompete agreements for medical workers and high earners to all workers.

About one in five American workers — and 350,000 workers in Minnesota alone — are bound by a noncompete agreement, which costs workers more than $250 billion per year by decreasing competition for their labor, according to the FTC.

“Noncompetes in general harm competition in the labor market by blocking workers from pursuing better opportunities, and preventing employers from hiring the best available talent,” Mann said during the Senate Labor Committee hearing on Tuesday.

If passed, Minnesota would join a small number of states that have banned noncompete agreements in some form, including California, Oregon and North Dakota.

Sen. Robert Kupec, DFL-Moorhead, who previously worked as a meteorologist in Fargo, said his employer put a noncompete agreement in his contract even though they’re unenforceable in North Dakota. He said the agreement said he couldn’t work in far-away markets including Duluth and Sioux Falls, where the company also had stations.

“(Employers) have used it in a way to intimidate (workers) and keep them from being able to move on and advance further in their career,” Kupec said.

An economist at the Federal Reserve Bank of Minneapolis told lawmakers in written testimony that noncompete agreements exacerbate workforce challenges by stifling competition, suppressing wages and hindering innovation.

Ryan Nunn, the Fed economist, said companies can still protect valuable trade secrets through nondisclosure agreements and intellectual property agreements. Companies are increasingly using noncompete agreements to reduce turnover and gain leverage in wage negotiations, Nunn wrote.

Republican members of the committee, who voted against advancing the bill, raised concerns that eliminating noncompete agreements could hurt small businesses like chiropractic clinics, dog training companies and insurance agencies.

Sen. Bill Lieske, R-Lonsdale, is a chiropractor and said the value of small clinics like his could be affected by the bill. One of the most valuable assets of a clinic is its patient list. He worried the seller of the clinic could simply open another office nearby and take patients with them.

Mann said she would be open to talking about how to address that issue.