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‘No-poach’ agreements under inquiry from state Attorneys General

“No poach” provisions in employment contracts are coming under scrutiny. The Attorneys General from 11 states announced Monday they sent a letter [1] requesting information on such agreements in franchise contracts to eight national fast-food franchisors.

Under such deals, companies agree to not hire workers from one another, even from one franchisor to the next.

An example cited by the Attorneys General includes a McDonald’s worker in Iowa who was prevented from leaving a part-time job at one McDonald’s restaurant to take a full-time job at another. A no-poach agreement was cited.

Attorneys General raised concerns that no-poach deals between firms hurt low-wage workers by limiting their ability to get better-paying jobs. They also contend such provisions have helped lead to persistent low-wage growth and that many workers are not aware they are subject to such agreements. Such deals also diminish franchisees’ ability to recruit employees from one franchise to another.

“No-poach agreements unfairly limit the freedom of fast-food and other low-wage workers to seek promotions and earn a better living,” Massachusetts Attorney General Maura Healey said. “Our goal through this action is to reduce barriers and empower workers to secure better-paying and higher-skill jobs.”

In their letter, the Attorneys General focus on the fast-food industry, but other industries have come under fire for no-poaching agreements. Apple, Google and other tech firms settled a no-poaching lawsuit [2] for $415 million in 2015.

In the fast-food probe announced Monday, the Attorneys General contend 58% of major franchisors have no-poach provisions in their franchise agreements and the number goes up to 80% when looking at only fast-food franchisors.

Fast food firms receiving letters from the Attorneys General include Arby’s, Burger King, Dunkin’ Donuts, Five Guys Burgers and Fries, Little Caesars, Panera Bread, Popeyes Louisiana Kitchen, and Wendy’s. The franchisors must send documents that include copies of franchise agreements and communications related to no-poach provisions by Aug. 6.

“We promise our workers that if they work hard, they will qualify for new opportunities, earn higher wages and improve their quality of life,” New Jersey Attorney General Gurbir Grewal said. “Through this letter, we’re trying to learn whether some of the biggest players in the fast food industry have contracts that undermine that promise.”

No-poach deals are also known as “employee non-competition,” “no solicitation,” “no hire” or “no switching” agreements.

Attorneys General taking part in the effort represent California, the District of Columbia, Illinois, Massachusetts, Maryland, Minnesota, New Jersey, New York, Oregon, Pennsylvania and Rhode Island.

In an upcoming article in Staffing Industry Review magazine, attorney Dan Forman addresses the topic of no-poaching agreements amid a warning from the Department of Justice against their use. The issue will be available online at the end of July.

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