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Seven fast-food chains agree to drop ‘no-poaching’ clauses

 (Associated Press)
By Jeff Stein Washington Post

Seven fast-food chains have agreed to drop “no-poaching” clauses that bar employees from switching between company franchises, agreeing to end a practice critics say drags down wages for millions of workers amid scrutiny from state authorities and federal lawmakers.

On Thursday, Washington Attorney General Bob Ferguson, D, said the seven chains – including Arby’s, Carl’s Jr., and McDonald’s – had agreed to no longer enforce the “no poaching” agreements at all of their locations, which include more than 25,000 stores nationwide. The hiring practice bars managers from hiring workers at another store in the same chain.

“Companies must compete for workers just like they compete for customers,” Ferguson said in a news release. “They cannot manipulate the market to keep wages low. My goal is to unrig a system that suppresses wages in the fast food industry.”

The announcement comes the same week 11 states launched a joint investigation into “no-poaching” clauses at eight national fast-food chains. Cory Booker, D-N.J., and Elizabeth Warren, D-Mass., are also sending letters about the practice to about 90 CEOs, asking them to disclose their “no-poaching” clauses, and have introduced legislation in Congress to make the practice illegal.

“We urge you to remove from your franchise agreements any language that imposes limits on worker mobility,” Booker and Warren write in the letters.

In a news release, Ferguson said the companies agreed to no longer enforce the clause because of a lawsuit being led by his office.

Auntie Anne’s, Cinnabon, Buffalo Wild Wings, and Jimmy John’s have also agreed to end the practice, according to Ferguson. The tax preparer H & R Block has also agreed to stop the practice, according to an email from a company spokeswoman.

Some economists say barring employees from switching between chain locations unfairly prevents them from bargaining for higher wages, while businesses maintain they are necessary for local firms to recoup the costs of their investments in personnel. Workers often do not know that these contracts bar them from seeking employment elsewhere.

About 80 percent of fast-food workers are constricted by no-poaching clauses, according to Massachusetts Attorney General Maura Healey, D, who is leading the states’ probe. About 58 percent of all “major franchises” use these “no-poaching” clauses, Haley’s office said.

Business groups have argued that the clauses ensure franchises can help ensure that they are rewarded for the time and money they put into training new workers.

“Provisions in franchise agreements allow franchise owners to protect the significant financial investments they make to train employees the skills and methods necessary to deliver the product or service to customers,” Matthew Haller, a spokesman for the International Franchise Association, said when Booker’s legislation was introduced.