Fast-food chains end no-poach clauses

Seven companies agree not to enforce policy blamed for locking in workers at low pay

Seven major restaurant chains, including Arby’s, Carl’s Jr., McDonald’s and Jimmy John’s, have agreed to drop a hiring practice that critics say may be keeping tens of thousands of fast-food workers locked in low-wage jobs.

Under agreements with Washington state announced Thursday, the companies — Auntie Anne’s, Buffalo Wild Wings and Cinnabon are the others — have pledged to remove so-called no-poach clauses from their contracts with franchisees.

The provisions prohibit workers at, for example, one Carl’s Jr. franchise from going to another Carl’s Jr. They do not stop those workers from taking jobs at restaurants run by a different chain.

In addition to stripping the clauses from existing franchise contracts in Washington, the seven chains have also vowed not to enforce them nationwide — a move that affects workers at tens of thousands of stores. The clauses cannot be included in new and renewed deals either.

No-poach clauses have drawn scrutiny over whether they specifically hold down pay for restaurant employees — one of the largest segments of the United States’ workforce — and also contribute to a broader wage stagnation that continues to plague the economy long after the end of the recession.

Many types of franchise businesses impose the clauses, but they may be most prevalent in the restaurant industry and are ubiquitous in the fast-food sector.

“My goal is to eliminate these provisions in all fast-food contracts in my state,” Attorney General Bob Ferguson of Washington, whose office reached the legally binding agreements with the seven chains, said in an interview this week. His office began investigating the issue several months ago after the New York Times published an article exploring how the clauses limit workers’ mobility.

The impact of the agreements negotiated by Ferguson’s office goes far beyond his state.

Unlike noncompete clauses, which jobseekers can review before signing hiring documents, no-poach provisions are buried in contracts between restaurant chains and franchisees, which independently own and operate the majority of stores. Workers at these stores may not even know they are bound by the restrictions until they try to land new jobs.

Franchise owners say the clauses help protect their investments of time and money in training employees. But a job offer from a prospective employer is often the best leverage with a current boss, and some economists worry that the provisions hinder people’s ability to exercise that leverage.

Last year, Princeton economists Alan Krueger and Orley Ashenfelter published a study in which they estimated that nopoach clauses affected about 70,000 restaurants in the United States, or more than a quarter of fast-food restaurants.

After examining the franchise deals of 40 of the country’s largest chains, Krueger and Ashenfelter concluded no-poach restrictions appeared to exist mainly to limit competition and turnover, possibly depressing wages in the process.

“I’m pleased that the research that Professor Ashenfelter and I did has shined attention on this issue,” Krueger said this week. “I hope that either through judicial action or legislation or voluntary decision by the franchise chains, that these noncompetitive practices are dropped.”

McDonald’s, the largest fast-food chain in the country by revenue, removed the clause in its franchise contracts last year, and said that it would not enforce them in existing contracts.

But some workers’ rights advocates have said McDonald’s did not always keep that promise. The company’s agreement with Ferguson’s office makes it legally binding.