Changing management companies - hiring current employers

If I lived in your complex and knew what I do know about HOAs, I would have real issues with how either you or the Board is going through this process. Sorry, those employees would not be worth $50K of my hard-earned money.

Ever try the CAI National site and post a job opening?

FYI, Any non-compete contract is null and void in California.

Yes, we are really concerned about the non-compete. We have to be really careful not to "interfere" because the old management company could come after us for tortious interference. Neither employee told us they had a non-compete until after we started this process. We just assumed because the liquidated damages clause was in our contract with the management company that this would be easy.

The new management company would love to have them as employees. Since we pay their salaries, their salaries would be the same as before. They want to work for the new company because it appears they are more supporting of their employees.

My other concern is for the employees. The regional director is really mad right now because she thinks she will get blamed for losing the contract. She's taking it out on the employees. It's not fair that they are suffering because we are making this change. We're trying to do right by them.

The employees are still employed by the old management company. At this point all we have done is express interest in having them come to the new company. The new company has not spoken to them or contacted them at all. We asked them if they would want to come and they said yes. So they have not violated their non-competes yet.

It's a crazy industry (see the other post from WendyM on how many portfolio property managers they have gone through).

Related --

This past week the FTC proposed a rule that would prohibit employers from imposing noncompete clauses on workers. Non compete clauses are "a widespread practice that economists say suppresses pay, prevents new companies from forming and raises consumer prices."

From https://www.washingtonpost.com/opinions/2023/02/04/ftc-noncompete-clauses-workers-ban/:

Some critics argue that the FTC’s move shows that the Biden administration is catering to labor unions. But banning noncompetes for most workers has substantial bipartisan support, because it is justified by research and real-world experience. Noncompetes depress wages, hamper people’s ability to change jobs and have a “chilling effect” on entrepreneurship, studies show. A free-market economy works better when workers may take their talents to the places they can do the most good.

These sorts of agreements have been around for centuries. They began with a reasonable premise: Companies invest time and money to train workers, and they don’t want those workers to leave right away for a rival firm. But over time, noncompetes have become draconian, sidelining workers for longer periods of time and restricting employees from working in ever-larger geographical areas. Today, nearly 1 in 5 U.S. workers are asked to sign a noncompete during their onboarding for a new job. Even some hourly workers at fast-food chains have had to agree to these parameters. In an eye-popping example, workers who made sandwiches at Jimmy John’s had to sign noncompetes saying they would not take a job at a rival firm for two years. (The company was forced to drop it.)

A number of states already have a version of the FTC’s proposed policy. With limited exceptions, three states ban noncompetes: California, North Dakota and Oklahoma. Eleven other states, plus the District of Columbia, ban it for a substantial number of workers. These states typically restrict noncompetes for workers making below a certain hourly wage or annual salary. For example, Washington state bans noncompete agreements for workers earning under about $107,000 a year, covering about three-quarters of the state’s workers.

Now, the FTC is in the process of deciding how far its ban should go. A policy akin to Washington state’s makes the most sense.

Noncompetes are particularly imprudent for low-wage and middle-income workers, especially as labor force participation shrinks, making it harder for companies to find qualified workers. Workers need to be able to change jobs — and even industries — as the economy evolves. Moreover, workers earning less than six figures don’t have the clout to negotiate the terms of a noncompete or hire lawyers to read over every paper they sign when taking a job. From an employer perspective, it’s difficult to argue that someone paid below an executive salary is so critical to a company that they should be barred from moving on and working elsewhere.

Opponents of any FTC ban argue that companies need to protect trade secrets and that firms won’t invest in worker training without noncompetes. But if companies want to protect trade secrets, there’s a better way: nondisclosure agreements. Similarly, while there is some evidence that companies with noncompetes do more worker training, the same study finds no evidence that these workers get paid more after that training. Indeed, the recent explosion of noncompetes has not changed the fact that the United States is woefully behind other countries in job training.

If companies feel as though they need to have their workers take a special course or program, they can have employees sign a “training repayment agreement,” in which workers agree to stay for a certain number of years in exchange for the company funding the training. Military academies have long used this model. It’s very clear to prospective workers.

Conservative legal experts also oppose the FTC proposal on the grounds that it is a “power grab” by the agency. But the FTC is charged with going after unfair methods of competition, and noncompetes are a prime example of uncompetitive behavior that states as different as Massachusetts and Oklahoma have barred.

On the other hand, proponents of imposing a total federal ban covering all workers, as the FTC has initially proposed and is currently seeking comment on, point out that California has had such a ban in place for decades, yet Silicon Valley has still thrived. Similarly, lawyers have a ban on noncompetes in their profession, and they are doing fine. Advocates for a full ban point out that high-wage workers, especially in tech and medicine, are often the most likely to leave and start their own company, and the societal benefits of their entrepreneurship can be large. But many of these workers have the clout and knowledge to negotiate any noncompete arrangements up front, before they take a job, making federal intervention less necessary.

The U.S. economy is suffering from a lack of dynamism. This century there’s been a surprising decline in the number of Americans starting businesses and moving to different states in pursuit of economic opportunities. Meanwhile, many companies are also struggling to find enough workers. Noncompetes make these problems worse.

In an ideal world, Congress would pass legislation banning noncompetes for most workers. Because that’s unlikely, the FTC would be right to move ahead.

I am chuckling here; I love it. Your HOA attorney sounds exceptional.

Applause for your board's attitude that it does not want an MC that treats employees the way this one apparently plans to. I call this excellent, wise business decision-making by the HOA board.

Thank you for the update.

I think I'd want to get the opinion of a lawyer who's well versed in employment law. The HOA attorney may be well informed, or he may not be, and what you don't know can hurt you.

There could potentially be issues both for the employees as well as for the would-be new employer who is trying to poach them. I've been participated in projects with a company other than my employer, and the contract between the two forbade the outside company from trying to entice us away from our current employer. The outside company did actually want to hire couple of us, as we discovered when I came back from lunch one day and mentioned to my team mate that I'd had a really odd conversation with John. We were both given hints that the opportunity existed and any interest on our part would be favorably received. It was one of the best examples of plausible deniability I've come across.

Based on that experience, I'd say check your contract with the current management company and see if there are relevant restrictions like that, and then maybe watch what you tell these employees? Although it does sound like that ship may have sailed...

Disclaimer: I am not a lawyer, especially an employment lawyer.

Lori,
Thanks for all the added information. So, it appears like you have a very complex community that's for sure. Finding good people is very hard. In Tx before we switched to a smaller PMC the National PMC we went through 5 different PMs the year we cancelled them. The reasons varied from going into the banking industry, then becoming a flight attendant, then getting fired to using a manager of the company to PM for us, to our last PM who was not bad, but it was too late by that point. That was all in 1 year and as the most active member of our HOA I did all the transitioning which is very time consuming. With our new PMC we have had the same manager for 4 years now and our social person for 3 1/2 years. It's a blessing when you have solid people in place you can depend on that's for sure.

Looking at where you are at and what you are going through, I would say you may be on the right track. If you truly think the people are going to become lasting employees. I think one of the reasons this site is so successful is we give our honest feedback of the possible downsides because so many of us have all lived them in our HOA's. Sometimes people tend to want to hear validation and we do not always give that.

Just one last thing. Everyone can be replaced including ourselves.