Fast-food chains end no-poach clauses

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

Santa Fe New Mexican - - NATION & WORLD - By Rachel Abrams

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.

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