Eleven states are investigating hiring practices that critics say prohibit minimum wage workers from seeking better positions or pay at different fast-food franchises within the same restaurant chains.
In an effort led by Massachusetts Attorney General Maura Healey, the attorneys general from 11 states including Minnesota sent a letter to eight fast-food chains, asking them to provide documents, including copies of franchise agreements and communications related to “no-poaching” provisions, by Aug. 6. The chains are Arby’s, Burger King, Dunkin’ Donuts, Five Guys Burgers and Fries, Little Caesars, Panera Bread, Popeyes Louisiana Kitchen and Wendy’s.
The provisions in question prohibit franchisees from hiring workers away from other restaurants within the same chain. Restaurant owners say the policies are meant to protect the investments they’ve made in training employees, but critics argue that they limit workers’ mobility and hold down wages, even in an increasingly competitive job market.
Among major franchisers, 56 percent have no-poach provisions in their franchise agreements, and the number is even higher, at 80 percent, for fast-food franchisers, Illinois Attorney General Lisa Madigan’s office said in a news release. “No-poach agreements trap workers in low-wage jobs and limit their ability to seek promotion into higher-paying positions within the same chain of restaurants,” she said in the release.
Chicago-based McDonald’s removed the no-poaching clause from its standard franchise contract in 2017 after employees filed antitrust lawsuits against the company.
The investigation by the attorneys general was prompted by a February study from economist Alan Krueger of Princeton University and Eric Posner of the University of Chicago Law School that showed a nearly 50 percent increase in the use of no-poaching clauses among major franchisers in the past two decades.
“These contractual devices give the employers more power to suppress wages,” Posner said. “Despite the booming labor market, there hasn’t been an increase in wages as you’d expect.
“One thing people don’t understand is when employers complain they can’t fill vacancies, what they’re really saying is they’re not willing to raise wages to a level that would attract people,” he added.
Dunkin’ Donuts does not have any provisions in its franchise agreement that prohibit franchisees from hiring workers from other restaurants within the chain, said spokeswoman Carrie Reckert. The company said employees are free to seek employment wherever they please.
Wendy’s spokeswoman Heidi Schauer said in an e-mail that the company does not impose any restrictions that prohibit franchisees from hiring or soliciting employees from other franchisees.
Arby’s, Burger King, Five Guys, Little Caesars, Panera and Popeyes did not respond to requests for comment.
Madigan’s office sued Champaign-based sandwich chain Jimmy John’s in 2016 for what it called “highly restrictive noncompete agreements.” The company settled with Madigan’s office in December 2016 for $100,000.
The following month, an Illinois law took effect that prohibits noncompete agreements for employees earning less than $13 an hour.