State attorneys general want to know more about fast-food 'no poach' and noncompete agreements

Michael L. Diamond | Asbury Park Press

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Some of the nation's biggest fast-food operators might have so-called "no-poach" agreements that stifle workers' chances to move to higher-paying jobs, attorneys general from 11 states and the District of Columbia indicated Monday.

No-poach agreements prevent franchisees from hiring workers away from one another. Non-compete agreements prevent employees from working for competitors after they leave.

"These agreements can exploit low-wage workers who are most in need of job protections,” said Robert Asaro-Angelo, New Jersey labor commissioner.

The practices recently have come under scrutiny. Some economists think they give employers more control over the labor market, preventing workers from jumping to higher-paying jobs and keeping wages artificially depressed.

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“Many employees only learn these agreements exist when they are denied the chance to advance to a better job, earn more money or obtain family-friendly schedule options," Pennsylvania Attorney General Josh Shapiro said in a press release.

The attorneys general from California, Illinois, Massachusetts, Maryland, Minnesota, New Jersey, New York, Oregon, Pennsylvania, Rhode Island and the District of Columbia sent letters to eight fast-food operators seeking copies of franchise agreements by Aug. 6:

Arby's, based in the Atlanta suburb of Sandy Springs, Georgia

based in the Atlanta suburb of Sandy Springs, Georgia Burger King, based in Miami (Its parent company is based in Oakville, Ontario)

based in Miami (Its parent company is based in Oakville, Ontario) Dunkin’ Donuts, based in the Boston suburb of Canton, Massachusetts

based in the Boston suburb of Canton, Massachusetts Five Guys Burgers and Fries, based in the District of Columbia suburb of Lorton, Virginia

based in the District of Columbia suburb of Lorton, Virginia Little Caesars, based in Detroit

based in Detroit Panera Bread, based in the St. Louis suburb of Richmond Heights, Missouri

based in the St. Louis suburb of Richmond Heights, Missouri Popeyes Louisiana Chicken, based in Atlanta, and

based in Atlanta, and Wendy’s, based in the Columbus, Ohio, suburb of Dublin

They said they learned that certain franchise agreements in their states might have contained provisions that restricted the franchise operators' ability to recruit or hire employees of other franchises.

"By limiting potential job opportunities, these agreements may restrict employees' ability to improve their earning potential and the economic security of their families," they wrote.

Congress is considering several bills that would rein in noncompete practices. In a letter to committee members that are overseeing the proposed legislation, the International Franchise Association, a trade group, said franchising offers career advancement on a massive scale.

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It said noncompete and no-poaching clauses help protect the investment employers make in training their workers.

To see them leave for a competitor "would jeopardize the success and viability of the franchise and would have a negative impact on all participants on the franchise value chain," Robert Cresanti, president and chief executive officer of the association, said in the letter.

The issue has been brewing. Princeton University economist Alan B. Krueger co-authored a study that showed 56 percent of major franchise operators in 2016 had no-poaching agreements in their contracts.

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Last year, McDonald's employees sued the company under anti-trust laws for including a no-poaching arrangement in its standard franchise contracts as far back as 1987, Krueger said in another study he co-wrote for the Brookings Institution, a District of Columbia think tank.

Other industries have faced similar allegations. Silicon Valley technology companies including Apple and Google, for example, agreed in 2015 to pay $415 million to settle a lawsuit claiming they agreed not to poach each others' employees.

But Krueger and his co-author Eric A. Posner of the University of Chicago Law School said the practice among fast-food companies should be prohibited, since many low-age workers "do not know their rights, cannot afford lawyers, receive little training, and are susceptible to threats from their former employers."

Follow Michael L. Diamond on Twitter: @mdiamondapp