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Minnesota banned noncompetes. A major property manager has a workaround.


Minnesota banned noncompetes. A major property manager has a workaround.

Jun 07, 2023 | 8:00 am ET
By Max Nesterak
Minnesota banned noncompetes. A major property manager has a workaround.
Josh Musikantow, a desk attendant at River Towers, is a leader in the effort to unionize more than 250 workers at condo buildings across the Twin Cities metro area. Photo by Max Nesterak/Minnesota Reformer.

When the property management company FirstService Residential Minnesota announced it was dropping noncompete clauses in employment contracts, it said the change aligned with the company’s values.

But a provision persists in its management contracts with condominium associations that says FirstService workers (including desk attendants and caretakers) may not be employed — either directly or indirectly — by the associations for two years after the contract expires.

That means condo owners who want to hire a new management company have to consider losing their staff, some of whom have worked in their buildings for years.

“It is something that we definitely think about and take seriously,” said Dustin Sprouse, president of the homeowners association for River Towers, a condominium complex in downtown Minneapolis that has used FirstService for decades.

River Towers is currently considering proposals from three property management companies including FirstService.

Sprouse said the condo association solicited management bids as part of routine fiduciary duties and not out of dissatisfaction with the caretakers or desk attendants. The prospect of losing employees weighs heavily on their decision, Sprouse said.

Leaders of FirstService Residential Minnesota, a subsidiary of the largest property management company in North America, did not respond to a request for comment asking if they would enforce the provision in the contracts with homeowners associations.

The company dropped noncompete clauses from its contracts with employees after the Reformer reported the story of a FirstService caretaker who was fired after eight years at Centre Village, a downtown Minneapolis condo building. Kevin Borowske and his wife had to move out of their condo and faced the prospect of not being able to seek employment at any other property management companies because of the noncompete clause in their employment contract.

The Minnesota Legislature later banned noncompete agreements and so-called no-poach agreements between owners of franchises like McDonald’s and Sbarro to not hire each other’s workers. The ban on noncompete agreements takes effect July 1 and doesn’t invalidate the provision in existing contracts.

The Federal Trade Commission has also proposed a ban on noncompete agreements, which the agency describes as “a widespread and often exploitative practice that suppresses wages, hampers innovation, and blocks entrepreneurs from starting new businesses.”

Unlike the noncompete agreements, FirstService workers say they were unaware of the restrictions in the contracts between the company and condo associations until they were approached by a reporter at Workday Magazine and The American Prospect for a story about similar restrictions in the contracts of another FirstService subsidiary in New Jersey.

“What’s most concerning is that we didn’t even know about it,” said Josh Musikantow, a desk attendant at River Towers who has worked for FirstService for 12 years. “We had every reason to think that our jobs were safe … and that if the contracts weren’t renewed (and) the HOA wanted to keep us, that they would be able to.”

Musikantow, who has been a leader in an ongoing unionization effort, said workers found the same or similar restrictions in the five other homeowner association contracts with FirstService they were able to obtain copies of.

Thirty-eight FirstService workers across more than a dozen properties sent a petition to FirstService on Monday asking the company’s managers to see a copy of every restriction that FirstService Residential Minnesota has on workers’ future job opportunities and a list of all homeowners associations that have adopted the restrictions.

They have not yet heard back from the company.