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“There’s one system in the history of the world that produces enough economic growth to meaningfully reduce poverty and meaningfully increase opportunity, and that’s free market capitalism,” the lawsuit quotes Puzder as saying in a television appearance. But franchisees of Carl’s Jr. and Hardee’s deliberately restrict the free market for workers through “no-hire” agreements. CKE franchisees “will not knowingly employ or seek to employ any person then employed by [Carl’s Jr.] or any franchisee of [Carl’s Jr.] as a shift leader or higher, or otherwise directly or indirectly induce such person to leave his or her employment without prior written consent,” according to a preliminary franchising agreement quoted in the lawsuit. This makes workers unable to threaten to leave for another CKE outlet at a higher wage. Because the CKE system is specialized, and franchisees are encouraged to promote from within, this hampers restaurant managers’ bargaining power. “The market for CKE employees is not free,” the lawsuit states. Several Silicon Valley firms settled a class-action lawsuit over similar anti-poaching allegations for $415 million in 2015. The lawsuit cleverly plays on CKE’s insistence that individual franchisees are their own separate entities, in direct competition with one another. In testimony before Congress, Puzder has said that all CKE franchisees make independent employment and operational decisions. “Our franchisees are not a division, subsidiary, or alter ego of CKE, but are truly independent small businessmen and businesswomen who know how to drive their own business,” Puzder told the House Education and the Workforce Committee in 2014. CKE’s franchise disclosure agreement states that franchisees do not get an exclusive territory, and “may face competition from other franchisees” or “outlets that we own and/or operate.” The parent company does this to avoid what is known as joint employer liability, so employees cannot hold them accountable for wage theft or hazardous working conditions. In other words: to avoid responsibility, CKE argues that the franchisees make their own decisions. But competing CKE franchises cannot restrict employees from switching job locations to hold down wages. Shift leaders at CKE restaurants, the lowest level of manager, make just $10 an hour on average, according to the lawsuit. Plaintiffs argue that the no-hire agreement suppresses wages and worsens working conditions by drying up the market for CKE restaurant-level managers. “CKE and Puzder cannot have it both ways,” the lawsuit states. “They cannot eschew responsibilities under labor and employment laws by embracing a ‘free market’ model of independent franchisees, while restraining free competition to the detriment of thousands of workers.”

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