California Attorney General Xavier Becerra joined a multistate effort led by the State of Massachusetts to request and review information about employee “no-poach” policies adopted and enforced by franchise corporations in their agreements with their franchisees. Under these agreements, one franchise operator contractually agrees not to hire or solicit the employees of another franchise operator.
As a result, low-wage workers are unable to seek better pay and benefits by going to work for a competing franchise. In a letter sent to eight fast food and casual dining establishments, the states request additional information about the use of these agreements. According to the letter, 58 percent of major franchise operators have no-poach provisions in their franchise agreements. The number is even higher, at 80 percent, for fast food franchisors. Worker advocates argue these provisions have led to persistently low wage growth and are anticompetitive in nature.
“California is the world’s fifth-largest economy because of our robust workforce,” said Attorney General Xavier Becerra. “No-poach agreements limit the growth of talented people in the workforce, and as a result, they limit our state’s economic potential. These agreements widen the imbalance of power between employee and employer. To ensure competition thrives in our state, we must ensure that franchises are not utilizing these agreements.”
The letter was sent to Arby’s, Burger King, Dunkin’ Donuts, Five Guys Burgers and Fries, Little Caesars, Panera Bread, Popeyes Louisiana Kitchen and Wendy’s. The letter asks these restaurants to provide information that includes copies of franchise agreements and communications related to no-poach provisions by August 6, 2018.
“No-poach” agreements are routinely included in franchise agreements for many fast food and fast-casual dining outlets. Workers are typically unaware that their employer has entered into such an agreement. These provisions are also known as “employee non-competition,” “no-solicitation,” “no-poach,” “no-hire,” or “no-switching” agreements. Agreements that contain these provisions ultimately restrict a franchisee’s ability to recruit or hire employees from one franchise to another. They also diminish an employee’s ability to seek new work and earn higher wages.
To view a copy of the letter sent to franchises across the United States, please visit the online version of this press release here.
This article was released by the Office of the California Attorney General.