Chains to end use of ‘no-poach’ pacts
In a Washington state agreement that extends to nearly 100 locations in Connecticut and some 15,000 nationally, eight restaurant franchisors are barring “no-poach” clauses in contracts that prevent franchisees from hiring workers at a competing location under the same brand.
Washington state Attorney General Bob Ferguson announced the agreement on Tuesday after an investigation into language in standard franchise contracts at Applebee’s, Five Guys, IHOP, Jamba Juice, Little Caesars, Panera and Sonic, which all have Connecticut locations; as well as Church’s Chicken.
The companies agreed to notify their franchisees of the change, remove any no-poach language from future franchisee contracts, end any enforcement for current agreements, and remove it from pacts nationally within four months.
According to Ferguson, the agreement will affect hundreds of thousands of workers nationally, allowing them to seek better offers from another franchisee and bolster their credentials by having a familiarity with the restaurant’s systems.
Princeton University researchers estimated last year that 58 percent of major franchisor contract agreements include no-poach clauses, covering 340,000 franchise units and millions of workers.
“Businesses can’t rig the system to avoid competition,” Ferguson said in a prepared statement. “This is a major step forward in achieving that goal, but we’re not done. Other fast food companies that use no-poach provisions are now on the clock to accept a similar deal.”
Applebee’s, IHOP, Jamba Juice and Little Caesars had already taken steps to comply after Ferguson launched an investigation, with New York, New Jersey, Massachusetts and Rhode Island having joined California and five other states in probing the issue. In July, Ferguson won similar commitments from McDonald’s, Arby’s, Auntie Anne’s, Buffalo Wild Wings and Cinnabon, among other companies, and said Tuesday he has other open inquiries on the industry practice.
The U.S. Department of Justice and the Federal Trade Commission have been investigating no-poach contracts since 2016, filing a civil law suit this past April against two industrial companies DOJ claimed were colluding together to avoid hiring each others employees.
And Congress is considering adding the proposed End Employer Collusion Act to existing U.S. law governing employment agreements and antitrust rules.