New state law seeks to increase wages, competition for workers

Michael Rubke works at the front desk of a Minneapolis condominium building — and he wants to be able to keep working there. 

Last year, he was surprised to learn that he could be forced to leave, regardless of his job performance.

Rubke works for the property management company contracted to oversee the building. That company has agreements with condo associations saying that, if a building switches management, it can’t make offers to staff like Rubke who want to stay there.

It’s a type of agreement also known as a “shadow noncompete” clause. 

On Monday, a new Minnesota law banning these clauses took effect. Companies providing services to other companies — like Rubke’s employer — will no longer be able to prevent them from hiring its former employers.

Rubke says that’s good news for employees like him. 

“These restrictive covenants limit the rights of the working class to seek gainful employment in the industries that they know,” Rubke said. “We, the workers, didn’t even know all the places where these covenants existed.” 

The new law is an extension of legislative efforts to end noncompete practices. 

Last year, the state Legislature enacted a law banning noncompete agreements between employers and employees. These agreements prevent workers from going to work for competing businesses. Recently, the Federal Trade Commission also banned the use of most noncompete agreements nationwide.

After banning noncompete agreements, Minnesota lawmakers found out about the loophole of “shadow” noncompetes. 

State Sen. Alice Mann, DFL-Edina, co-authored the bill to ban the practice. She said many workers had no idea they were impacted by these kinds of agreements, since they appear in contracts between companies instead of contracts with employees.

“That will no longer be legal in Minnesota,” Mann said. “Someone will not be able to make a contract affecting your future income and your future life without your knowledge. It is simple; it is fair.”

State Rep. Emma Greenman, DFL-Minneapolis, another co-author of the bill, said she heard from people in building services and childcare industries who realized that they, too, were affected by these agreements. 

Greenman said it’s a problem when employees can’t stay in their buildings.

“Having somebody who understands and knows the residents, the neighbors, is really important,” Greenman said. 

Supporters of the law hope that will make wages more competitive, as workers can choose between more potential employers.

“We think that this is just common sense for our communities, for our workers, and certainly for competition in our marketplace,” Greenman said. 

The new law does not affect existing shadow noncompete agreements, but it will prevent companies from entering into new ones. Rubke said he hopes employers with standing agreements will choose not to enforce them.