H&R Block’s ‘no-poach’ prac­tice faces law­suit, in­ves­ti­ga­tion

The Kansas City Star - - Business - BY MARK DAVIS [email protected]­star.com

Weeks after a former em­ployee sued H&R Block al­leg­ing harms she suf­fered un­der its “no-poach” hir­ing prac­tices, the Kansas City-based tax firm also faces a Wash­ing­ton state in­ves­ti­ga­tion into the same is­sue.

No-poach hir­ing prac­tices have been wide­spread among fast-food com­pa­nies. They gen­er­ally pro­hibit fran­chise oper­a­tors from hir­ing the em­ploy­ees of any other fran­chise op­er­a­tor in the chain.

Sev­eral states’ at­tor­neys gen­eral be­gan in July to chal­lenge no-poach clauses in the fran­chise con­tracts of many fast-food chains.

On Wed­nes­day, Wash­ing­ton At­tor­ney Gen­eral Bob Fer­gu­son’s of­fice con­firmed it is in­ves­ti­gat­ing H&R Block along with many other com­pa­nies iden­ti­fied in an aca­demic study as us­ing no-poach clauses in fran­chisee con­tracts. A spokes­woman in Fer­gu­son’s of­fice de­clined to dis­cuss the in­quiry into H&R Block’s prac­tices.

More than three dozen com­pa­nies with fran­chise restau­rants and stores have now signed for­mal agree­ments with Fer­gu­son’s of­fice to end their use of no-poach clauses na­tion­wide. The list in­cludes Mc­Don­ald’s, Pizza Hut, Ap­ple­bee’s, IHOP, Denny’s, Burger King and Cinnabon.

An H&R Block spokes­woman de­clined to pro­vide in­for­ma­tion about the com­pany’s cur­rent prac­tices for the roughly one third of Block tax of­fices that are owned and run by fran­chisees. She would nei­ther con­firm nor deny an ear­lier re­port by The Wash­ing­ton Post that had cited an email from an H&R Block spokes­woman say­ing the com­pany had agreed to stop the prac­tice.

The law­suit against H&R Block came late last month from Melissa Ram­sey, who had been man­ag­ing an H&R Block tax of­fice in Fair­way when it was shut down. She nat­u­rally sought work at other Block of­fices, the law­suit said.

“They re­fused to talk to her,” said Ram­sey’s at­tor­ney, Rick Paul. “Be­cause of that clause, they wouldn’t even talk to her.“

The law­suit said that since 2009, H&R Block has in­cluded a no-poach clause in the stan­dard con­tract that gov­erns the the roughly 3,300 Block tax of­fices owned and run by fran­chisees. It also said H&R Block fol­lowed a no-poach pol­icy by avoid­ing em­ploy­ees of fran­chise of­fices when hir­ing for the nearly 6,700 tax of­fices H&R Block it­self op­er­ates.

Block’s pol­icy means tax of­fice em­ploy­ees have paid dearly — in­clud­ing tak­ing lower wages — be­cause they weren’t able to mar­ket their skills, some spe­cific to work­ing at H&R Block, to the places most in­ter­ested in those skills, namely other H&R Block of­fices, the law­suit said.

Ram­sey seeks class ac­tion sta­tus to rep­re­sent all af­fected Block em­ploy­ees who worked there from Jan. 1, 2009, to May 10, 2018.

The H&R Block spokes­woman said the com­pany is re­view­ing the law­suit but does not com­ment on lit­i­ga­tion.

Ram­sey’s claims and Wash­ing­ton State’s in­quiry hit just as H&R Block is work­ing to fill thou­sands of tax pro­fes­sional, man­ager, re­cep­tion­ist and other tax of­fice jobs for the com­ing tax sea­son.

A HID­DEN CLAUSE

Al­though no-poach­ing clauses hit the news last sum­mer, they have ex­isted largely un­de­tected for years.

Even now, how­ever, work­ers whose pay or pro­mo­tions may have been thwarted by such agree­ments likely don’t know be­cause the bar­rier is hid­den in­side the fran­chise agree­ments.

“Part of the is­sue with no-poach clauses is that work­ers of­ten don’t know they ex­ist, so they wouldn’t know to com­plain about them,” said Meg­gie Quack­en­bush, a deputy press sec­re­tary with the Mas­sachusetts at­tor­ney gen­eral’s of­fice that be­gan in­ves­ti­gat­ing the prac­tice in the fast-food in­dus­try last sum­mer.

Some com­pa­nies have fought back against gov­ern­ment and pri­vate chal­lenges to their hir­ing prac­tices.

Wash­ing­ton’s at­tor­ney gen­eral Fer­gu­son sued Jersey Mike’s Fran­chise Sys­tems Inc. and many fran­chisees in mid-Oc­to­ber, cit­ing a “no-poach pro­vi­sion” in the chain’s fran­chise agree­ments.

Jim­mie John’s En­ter­prises Inc. has been de­fend­ing it­self from a former em­ployee’s law­suit filed in Jan­uary that claimed the com­pany’s fran­chisees op­er­ate un­der an agree­ment not to “so­licit, re­cruit, or hire each other’s em­ploy­ees.” In 2016, it had set­tled a com­plaint by the New York at­tor­ney gen­eral in­volv­ing non-com­pete agree­ments cov­er­ing em­ploy­ees.

Lit­tle Cae­sar En­ter­prises was sued in Septem­ber over no-poach pro­vi­sions, and Aun­tie Anne’s was sued in Au­gust over claims of anti-poach­ing agree­ments gov­ern­ing fran­chisees.

Sev­eral law­suits against three rail­way equip­ment com­pa­nies were com­bined into one fed­eral law­suit in Penn­syl­va­nia. The U.S. Depart­ment of Jus­tice pre­vi­ously had taken ac­tion against the rail­way equip­ment com­pa­nies, but these were sep­a­rate busi­nesses rather than fran­chises that are part of a chain.

HURT­ING WORK­ERS’ WAGES

Ram­sey’s law­suit said no-poach­ing ben­e­fited H&R Block and its fran­chisees by “re­strict­ing com­pe­ti­tion for em­ploy­ees in the mar­ket and ar­ti­fi­cially sup­press­ing wages.”

Specif­i­cally, the law­suit claimed, sea­sonal tax pre­par­ers work­ing in­side H&R Block of­fices earned less than half the na­tional av­er­age wage for tax pre­par­ers re­ported by the U.S. Bu­reau of La­bor Statis­tics. Re­cep­tion­ists at Block tax of­fices earn 28 per­cent less than the na­tional av­er­age for re­cep­tion­ists, it said.

NEIL NAKAHODO Photo il­lus­tra­tion

A law­suit claims H&R Block sys­tem­at­i­cally sup­pressed wages in its tax of­fices through “no-poach” clauses in con­tracts that gov­ern stores owned by fran­chisees rather than the com­pany it­self.

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