Noncompete Clauses Are Depressing Wages and Hurting Workers

The proliferation of noncompete agreements in even low-wage jobs keeps wages low by preventing workers from finding new jobs in their field. For a Minnesota couple allegedly fired for unionizing, such agreements may also make them homeless.

A sanitation worker for Downtown Alliance carries his cleaning supplies through Lower Manhattan, February 22, 2018, in New York City. (Drew Angerer / Getty Images)

Kevin Borowske is still mulling it over after being fired last week — and evicted as of February 28. Was he a scientist with the proprietary recipe for a cleaning solution? Was he the holder of a confidential blueprint concealing the secret rooms in the condo?

Otherwise, he’s at a loss as to why the property management company FirstService Residential had him sign a noncompete agreement when he was hired as a caretaker — a job that blends janitorial and light housekeeping services — at a high-rise building in Minneapolis, Minnesota.

A noncompete agreement bars the worker from taking a similar job with another company for a period of time. You might assume that such agreements would mainly be used to keep workers with proprietary information from being poached by a firm’s competitors. But now all kinds of employers require workers to sign them — so many that the Federal Trade Commission (FTC) is considering outlawing the practice.

A 2021 study found that 38 percent of workers have had to sign a noncompete agreement at some point.

Borowske is banned from working for FirstService’s competitors, under threat of lawsuit; the agreement he signed says he would even owe the company any legal fees associated with a suit.

His wife Larisa Borowske was fired, too. They suspect they were let go because they were involved in protesting wage theft by their employers and later striking.

Blocked From Work

The Borowskes’ jobs involved living on site because they were on call for emergencies. Now unemployed and homeless, the couple has one month to find new housing — and can’t get new employment in the only sector they’ve known for nearly a decade.

“We’re older employees, but we still have a little time to work,” said Borowske, who is fifty-six. “We can’t go to another building and become caretakers.”

The Borowskes feel like their life has been turned upside down. Along with their housing and their job, they lost their health insurance and more.

“Oh, my goodness, my life insurance was terminated on the same day [I was fired],” Borowske said. “In fact, they supply us with telephones; they shut off our telephones. So we couldn’t communicate, and we had to run out and buy telephones.

“I’m just not sure how we’re supposed to survive this, but we will.”

Borowske describes himself as “an award-winning employee” — four years ago, he was one of three workers who got special recognition, out of a pool of 650. His good reputation has earned him the support of condo residents; many have been calling and offering to hire him for small repairs to tide him over until he secures another job.

But he politely declines. “I can’t, because I’m afraid of what would happen if FirstService found out.”

New Rules?

The FTC proposed a new rule in January to ban employers from forcing workers to sign noncompete agreements. The Minnesota legislature is also considering outlawing the practice.

If enacted, the national ban would boost worker earnings by an estimated $300 billion per year across the economy. Studies show that noncompete agreements depress wages, probably in large part by suppressing wage competition — employers don’t have to worry that their employees will leave for a better-paying competitor.

Courts already frown on noncompete agreements; often they are ultimately ruled unenforceable. But no matter the eventual outcome of a court case, FirstService still reaps the short-term benefits of terrorizing workers and discouraging organizing.

“Back when we got hired, they’re like, ‘You have to sign [the noncompete agreement] if you want to be an employee of FirstService,’” Borowske said. “And of course, at the time, I didn’t really give it much thought. You just do what they tell you.”

His starting pay in 2004 was eight dollars hourly. Over the years his pay rose to $16.05, which he credits to SEIU’s national Fight for $15 campaign, even though his job at FirstService was nonunion.

Management didn’t give Borowske a reason why he was fired, but he thinks his union organizing and wage-theft settlement have put a target on his back.

At the outset of the pandemic in March 2020, Borowske went to management about being underpaid. By June, he had joined a lawsuit that found that FirstService Residential had not paid overtime to one hundred workers “by failing to include housing credits in calculating the regular rate of pay used to pay overtime compensation,” according to court papers.

The company settled for $250,000, of which $150,000 went to the one hundred caretakers. The Borowskes’ payouts were $12,095 and $2,919.

Last October, Borowske was among three hundred maintenance and desk attendants who went on an unfair labor practice strike at seven of the largest condo buildings in the Twin Cities. They were striking against management’s intimidation tactics as they organized to join SEIU Local 26.

“Because of my unionizing efforts, my wife and I got terminated,” he said.