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September 18, 2019Cart

Business

by Westchester County Business Journal
by WCBJ

Facing legal challenge, seven fast-food chains agree to end ‘no-poach’ policies

Seven national fast-food chains have agreed to end a practice that blocks employees from moving to potentially better jobs at different locations within the same brand.

Bob Ferguson, the attorney general of Washington state, announced July 12 that his office has reached agreements with the chains to end what’s known as “no-poach” agreements. The agreements, which are often written into franchising contracts, prohibit franchisees from hiring employees from another store within the same chain.

Economists argue the agreements restrict competition and wage growth by preventing low-wage workers from advancing to better opportunities. In the year since a major research paper on no-poach policies was covered by the New York Times, fast-food policies have faced increased scrutiny from both state and federal officials.

Ferguson said the threat of litigation from Washington pressured the companies to agree to end the policy. The state has legally binding agreements with Arby’s, Auntie Anne’s, Buffalo Wild Wings, Carl’s Jr., Cinnabon, Jimmy John’s and McDonald’s.

The companies are legally obligated to stop including no-poach language in new franchise agreements and must remove any no-poach provisions in existing franchise agreements throughout the country.

McDonald’s had already announced a plan to end no-poach agreements, but the Washington agreement makes that promise legally binding, according to Ferguson.

The announcement came just days after a separate group of 11 attorneys general, including New York Attorney General Barbara D. Underwood, formed a coalition to investigate no-poach practices at national fast-food chains. The group sent letters asking for information on no-poach agreements to Arby’s, Burger King, Dunkin’ Donuts, Five Guys Burgers and Fries, Little Caesars, Panera Bread, Popeyes Louisiana Kitchen and Wendy’s.

Meanwhile, U.S. Sens. Cory Booker, D-N.J., and Elizabeth Warren, D-Mass., introduced a bill in February called the End Employer Collusion Act, which would ban no-poach agreements. Booker and Warren sent a letter July 12 to the CEOs of 90 of the country’s largest franchises urging an end to no-poach clauses.

The no-poach scrutiny has followed a 2017 research paper from two Princeton University economists, which said the agreements exist in more than half of the franchise contracts for the 40 major national chains examined.

The paper argued the agreements could be seen as evidence of employers trying to restrict competition in the job market.

The authors, Alan B. Krueger and Orley Ashenfelter, concluded that, “to the extent this practice has grown or become more effective, it might help explain a recent puzzle in the U.S. job market: unemployment has reached a 16-year low and job openings are at an all-time high, yet wage growth has remained surprisingly sluggish.”