New state law aims to boost wages, competition among workers

Michael Rupke works at the front desk of an apartment building in Minneapolis — and he wants to be able to continue working there.

Last year, he was surprised to learn that he might have to leave his job, regardless of his performance.

Robb works for the property management company that has been hired to oversee the building. The company has agreements with the apartment associations that say if the building changes management, they can’t make offers to employees like Robb who want to stay there.

It is a type of agreement also known as a “shadow non-compete clause.”

On Monday, a new Minnesota law went into effect that bans such provisions. Companies that provide services to other companies—like Robeck’s employer—will no longer be able to prevent them from hiring their former employers.

That’s good news for employees like him, says Rupke.

“These restrictive covenants,” said Rubke, “limited the rights of the working class to seek gainful employment in industries they knew. We workers did not even know where these covenants were.”

The new law is an extension of legislative efforts to end anti-competitive practices.

Last year, the state legislature passed a law banning non-compete agreements between employers and employees. These agreements prevent workers from going to work for competing companies. More recently, the Federal Trade Commission also banned the use of most non-compete agreements nationwide.

After banning non-compete agreements, Minnesota lawmakers discovered the loophole of “shadow” non-compete agreements.

Edina State Senator Alice Mann, D-Labor, co-authored the bill to ban the practice. She said many workers had no idea they were affected by these types of agreements because they appear in contracts between companies rather than contracts with employees.

“This will no longer be legal in Minnesota,” Mann said. “No one will be able to enter into a contract that affects your future income and your future life without your knowledge. It’s simple; it’s fair.”

State Rep. Emma Greenman, a Minneapolis Democrat and co-author of the bill, said she has heard from people who work in construction and child care who realize they are also affected by these agreements.

The problem, Greenman said, is that employees can’t stay in their buildings.

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

Supporters of the law hope it will make wages more competitive, as workers can choose from a greater number of potential employers.

“We think this makes sense for our communities, for our workers, and certainly for competition in our marketplace,” Greenman said.

The new law does not affect existing non-compete agreements, but it will prevent companies from entering into new ones. Robeck said he hopes employers with existing agreements will choose not to enforce them.