Ferguson’s initiative now has ended no-poach provisions at 23 corporate chains

SEATTLE — Attorney General Bob Ferguson today announced that eight additional corporate, fast-food chains will end no-poach practices nationwide, joining 15 others. The 23 account for more than 67,000 locations nationwide and employ millions of workers. The companies will remove all no-poach clauses, which put downward pressure on wages and restrict worker mobility, from all current and future franchise contracts.

Ferguson began investigating fast-food chains in January as part of an initiative to eliminate no-poach clauses nationwide. These eight companies ― A&W, Burger King, Denny’s, Papa John’s, Pizza Hut, Popeyes, Tim Hortons and Wingstop ― will remove no-poach language from current and future contracts, and no longer enforce no-poach provisions currently included in franchise agreements at more than 24,000 locations nationwide.

With this announcement, Ferguson is nearing his goal of eliminating no-poach clauses in the fast-food industry among corporate chains with a significant nationwide presence. Ferguson continues to investigate a handful of corporate chains, including Baskin Robbins, Domino’s, Quiznos, Firehouse Subs and Jersey Mike’s. If they refuse to enter into similar, legally-binding agreements to eliminate no-poach clauses, Ferguson will file enforcement actions. Ferguson’s investigation has not uncovered evidence of any other fast food chains in Washington state that use no-poach clauses.

“My goal is to eliminate no-poach clauses nationwide to benefit workers,” said Ferguson. “No-poach provisions create a rigged system where businesses no longer have to compete for workers, putting downward pressure on wages nationwide. That’s wrong — and illegal.”

The eight companies entered into legally binding agreements filed in King County Superior Court:

The fast-food companies are legally bound to immediately stop enforcing no-poach clauses and stop adding the language to new franchise contracts. To ensure these changes occur nationwide, the companies must notify all franchisees, or independent franchise owners, of the requirements.

The companies must remove any language from existing contracts in Washington within 60 to 120 days. At locations outside of Washington state, the companies must remove no-poach clauses as contracts come up for renewal.

Papa John’s and Pizza Hut previously discontinued no-poach practices within the last year. A&W ended its practices shortly after the Attorney General’s investigation began. These legally binding agreements announced today ensure that all of these companies are legally bound to end the practice in all current and future franchise agreements. These eight corporate chains must now proactively remove no-poach clauses in contracts with Washington franchise locations.

Ferguson continues to investigate other corporate chains that utilize no-poach agreements in industries other than fast food, including:

Hotels

Car repair services

Gyms

Home healthcare services

Cleaning services

Convenience stores

Tax preparation

Parcel services

Electronics repair services

Child care

Custom window covering services

Travel services

Insurance adjustor services

No-poach provisions appear in lengthy franchise agreements that owners of fast-food franchises sign with corporate headquarters. Consequently, employees are generally unaware the provisions even exist. In effect, the provisions prohibit employees from moving among restaurants of the same corporate chain ― for example, prohibiting one Little Caesars employee from accepting employment from another Little Caesars franchise location for higher pay.

Because employees cannot move to another location within their corporate brand, their current location has less incentive to give them raises.

Ferguson’s investigation

A September 2017 article in the New York Times titled “Why Aren’t Paychecks Growing? A Burger-Joint Clause Offers a Clue,” focused on the downward pressure no-poach agreements among fast-food franchises place on wages. After reading the article, Solicitor General Noah Purcell referred the subject to the Attorney General.

Early this year, Ferguson’s Antitrust Division launched an investigation into these so-called “no-poach” clauses in fast-food chains after research by Princeton economists Alan Krueger and Orley Ashenfelter pointed out the issues with the practice.

Professors Krueger and Ashenfelter examined franchise agreements from 2016 for 156 of the largest franchise companies in the United States. The franchise agreements for companies with more than 500 franchise locations operating in the U.S. were analyzed for any language “restricting the recruitment and hiring of employees from other units within the franchise company.”

The economists believe that “no-poach” clauses reduce opportunities for low-wage workers and stagnate wages. Ferguson asserts that no-poach provisions harm workers in Washington and across the nation. Restricting competition, whether in the labor market or the burger market, violates the state Consumer Protection Act.

Beginning in January, the Attorney General’s Antitrust Division used the economists’ list to determine which fast-food companies used no-poach clauses and were present and employed people in Washington. Out of the original 31 the division identified, three chains ― Hissho Sushi, Long John Silver’s and Wendy’s ― did not use no-poach provisions in their franchise contracts. In addition to the eight companies announced today, Ferguson negotiated an end to no-poach provisions with seven fast-food chains in July and eight more in August.





Ferguson is expanding his investigation to cover fast-food chains with fewer than 500 stores nationwide.

In addition, Ferguson has since expanded his investigation beyond the fast-food chains to other franchise chains operating in Washington.

Senior Assistant Attorney General Jonathan Mark and Assistant Attorney General Eric Newman of the Attorney General’s Antitrust Division are leading the no-poach initiative.

The Office of the Attorney General's Antitrust Division is responsible for enforcing the antitrust provisions of Washington's Unfair Business Practices-Consumer Protection Act. The division investigates and litigates complaints of anticompetitive conduct and reviews potentially anticompetitive mergers. The division also brings actions in federal court under the federal antitrust laws. It receives no general fund support, funding its own actions through recoveries made in other cases.

The Antitrust Division investigates complaints about potential anti-competitive activity. For information about filing a complaint, visit https://fortress.wa.gov/atg/formhandler/ago/AntitrustComplaint.aspx.

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The Office of the Attorney General is the chief legal office for the state of Washington with attorneys and staff in 27 divisions across the state providing legal services to roughly 200 state agencies, boards and commissions. Visit www.atg.wa.gov to learn more.

Contacts:

Dan Jackson, Acting Communications Director, (360) 753-2716; DanJ1@atg.wa.gov