Eight additional restaurant chains have committed to scrap policies that limit workers’ ability to move from one franchise to another in search of better wages and work opportunities, Washington state Atty. Gen. Bob Ferguson announced.
In July, seven restaurant and fast-food chains, including Carl’s Jr. and Cinnabon, agreed to remove these rules from their franchise contracts. Now Applebee’s, IHOP, Five Guys Burgers & Fries, Panera Bread, Church’s Chicken, Jamba Juice, Little Caesars and Sonic — which, combined, have more than 15,000 locations nationwide — have followed suit, Ferguson announced Monday.
The decision is a result of Ferguson’s investigation into the food industry’s “no-poach” policies, which critics have long blamed for keeping wages low, hindering career mobility and inhibiting fair competition. Ferguson has cited antitrust laws, saying that businesses should compete for workers “the same way as they compete for customers.”
Under the provision, a Jamba Juice employee who lives in Cerritos and works at a franchise in Santa Monica, for example, could not get a job at a Jamba Juice franchise that is closer to home. And because the franchises know that their workers can’t defect to other franchises in the same chain, they might have less reason to offer higher wages or other incentives to retain their workers.
Companies have said the provision is meant to protect employers’ investments in training personnel.
“Businesses can’t rig the system to avoid competition,” Ferguson said in a statement. “Other fast-food companies that use no-poach provisions are now on the clock to accept a similar deal or face litigation from my office.”
The issue was raised last year by two Princeton professors, Alan Krueger and Orley Ashenfelter, who found that no-poach clauses in franchise agreements may have been a cause of a lack of wage growth in the United States. They said these rules affected 70,000 restaurants nationwide, the New York Times reported.
Without no-poach clauses, workers can find jobs that pay higher wages, are closer to where they live or offer better work hours, and companies gain access to a wider talent pool, Krueger said.
Church’s Chicken, which has 63 locations in California, rarely had a reason to even think about invoking the clause, Executive Vice President Craig Prusher said in a statement. “We want all current and prospective employees to know they are free to work where they choose.”
The other seven companies whose agreements were announced this week did not respond to requests for comment.
Under the agreements, the eight chains will immediately end the practice at all U.S. locations and stop adding no-poach clauses to new contracts. In Washington state, they will have 90 to 120 days to remove the clauses from existing contracts, while in the rest of the country, contracts will be modified as they come up for renewal.
California is separately involved in a multistate effort to scrutinize information about no-poach practices in the restaurant and fast-food industry.
“ ‘No poach’ provisions limit California’s economic potential and the growth of talented people in our robust workforce,” a spokesperson for California Atty. Gen. Xavier Becerra said in a statement. “These agreements prevent experienced workers from bargaining for better positions with better salaries.”
The phenomenon is not unique to the food industry, and Krueger said he would like to see other kinds of businesses get rid of their no-poach clauses. “They’re also used in the janitorial and maintenance industry, in health and fitness, and in the automobile industry,” he said.