7 fast-food restaurants to remove no-poach clauses from franchise contracts

UPDATE: July 13, 2018: Seven restaurant chains, including Arby's, McDonald's, Carl's Jr., Jimmy John's, Auntie Anne's, Buffalo Wild Wings and Cinnabon, all agreed to end the no-poach agreements under a deal reached with Washington State, The New York Times reported. The companies said they would remove the clauses from the franchise contracts and end enforcement of the clauses nationwide.

Dive Brief:

Eleven state attorneys general are investigating fast-food franchises' no-poach agreements. Led by Massachusetts Attorney General Maura Healey, the investigation is looking into whether no-poaching agreements unfairly treat low-wage workers by forbidding other franchisees of the same chain from hiring them, according to a statement from Healey's office.
Healy said that no-poaching agreements keep low-wage workers locked in low-paying jobs without opportunities for advancement. “Our goal through this action is to reduce barriers and empower workers to secure better-paying and higher-skill jobs,” she said, adding that, in many cases, fast-food industry workers don't know they're bound by no-poach agreements.
The attorneys general sent a request for information letter to Arby’s, Burger King, Dunkin’ Donuts, Five Guys Burgers and Fries, Little Caesars, Panera Bread, Popeyes Louisiana Kitchen, and Wendy’s. According to statistics cited in the statement, 80% of fast-food franchisors have such agreements. The letter asks the restaurants to submit copies of their no-poaching agreements and any communication relating to the agreements by Aug. 6, 2018.

Dive Insight:

No-poach agreements occur when companies agree not to recruit or hire each other's employees. The subject received renewed interest from the compliance community in January after the U.S. Department of Justice (DOJ) announced that month that it was looking into no-poach agreements with "a handful criminal cases in the works." This news appeared not long after the agency issued guidance in October 2016 that affirmed it is illegal for employers to agree not to hire one another's workers.

Employers got a first glimpse of these enforcement efforts in April 2018, when DOJ sued and settled with two rail equipment manufacturers. In that suit, DOJ alleged both employers had maintained agreements not to compete for each other’s employees which, according to DOJ, restricted competition for industry workers, limited worker access to better job opportunities, restricted worker mobility and deprived them of information that could have been used to negotiate for better terms of employment.

There are a number of steps that HR can take to avoid liability, experts previously told HR Dive, including conducting antitrust audits of employee and other contractual agreements.