Home Economy NY joins coalition investigating ‘no-poach’ agreements in fast-food industry

NY joins coalition investigating ‘no-poach’ agreements in fast-food industry

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New York Attorney General Barbara D. Underwood has joined a coalition of 10 state attorneys general – and the District of Columbia – that will investigate hiring practices at national fast-food chains.

The coalition – led by Massachusetts Attorney General Maura Healey – sent a letter July 9 to eight separate franchises requesting information on “no-poach” agreements. The agreements prohibit franchisees from hiring employees from another store within the same chain. So, while a move from a Burger King to a Wendy’s wouldn’t be blocked under such an agreement, a jump from a part-time role at one Burger King location to a full-time job at another potentially could be stopped.

That type of agreement, the coalition argues, prevents low-wage workers from being able to advance to better opportunities.

“Workers deserve to have the opportunity to earn higher wages and seek promotions — yet no-poach provisions make that impossible,” Underwood said. “My office will continue to protect the rights of workers in New York and across the country.”

While noncompete clauses are often agreements between an employee and an employer, no-poach clauses are often written into contracts between chains and franchisees. That means employees don’t have to agree to, or even be aware of, the no-poach rule, but can still have their opportunities limited by them.

The letter targets Arby’s, Burger King, Dunkin’ Donuts, Five Guys Burgers and Fries, Little Caesars, Panera Bread, Popeyes Louisiana Kitchen and Wendy’s.

About 80 percent of fast-food franchisees have no-poach provisions in their franchising agreements, according to the letter from Healey’s office. The agreements reach industries beyond fast food. Healey cited a 2017 research paper from Princeton University economists Alan B. Krueger and Orley Ashenfelter, which found no-poach agreements in 58 percent of major franchise contracts, including at H&R Block and Jiffy Lube.

The Princeton economists noted in the paper that the prevalence of no-poaching agreements is evidence of employers trying to restrict competition in the labor market.

Krueger and Ashenfelter’s paper concluded that, “to the extent this practice has grown or become more effective, it might help explain a recent puzzle in the U.S. job market: unemployment has reached a 16-year low and job openings are at an all-time high, yet wage growth has remained surprisingly sluggish.”

That conclusion caught the eye of federal lawmakers. U.S. Sens. Cory Booker, D-N.J., and Elizabeth Warren, D-Mass., introduced a bill in February called the “End Employer Collusion Act,” which would ban no-poach agreements. A similar bill was introduced a month later by House Democrats.

Fast-food employers have argued that the provisions help protect training investments in an industry with high turnover. The International Franchise Association (IFA), a franchising trade group, said in a statement July 9 that it hopes lawmakers will “engage with us in a constructive way to find a solution that protects workers’ rights and promotes economic growth.”

In a letter to federal lawmakers in June, IFA President and CEO Robert Cresanti wrote the investment that franchise systems make in training employees represents an important business asset.

“In certain cases, if these methods were to be shared widely outside of the franchise brand – or if franchisees were to lose the operational proficiencies of various employees whom they trained at great cost – the competitiveness of the franchise could be seriously undermined,” he wrote.

The attorneys general coalition asks each company in the letter whether their franchise agreements have included any language restricting employment between franchises since January 2015. The AGs also want information on the types of employees included in no-poach restrictions, whether those employees were informed of the agreements and the geographic scope of the agreements.

The letter was also signed by the attorneys general of California, Illinois, Massachusetts, Maryland, Minnesota, New Jersey, Oregon, Pennsylvania and Rhode Island.

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