Daily Labor Report®

McDonald’s, Arby’s, Other Chains to End No-Poach Hiring Rules (1)

July 12, 2018, 5:25 PMUpdated: July 12, 2018, 7:50 PM

McDonald’s Corp., Jimmy John’s LLC, and five other restaurant chains “will immediately end” a requirement that franchisees not hire workers from other franchisees within the same brand, Bob Ferguson, Washington state’s attorney general, said July 12.

The seven companies have 557 restaurants in Washington and an estimated 26,697 locations nationwide, Ferguson said. They will strip no-poach clauses from their franchise agreements in Washington and stop enforcing them nationwide, he said. The other companies are Arby’s, Auntie Anne’s, Buffalo Wild Wings Inc., Carl’s Jr., and Cinnabon.

A no-poach clause bars a franchisee from hiring workers from another one of the brand’s franchisees. It’s different from a noncompetition clause, in which a worker agrees not to leave an employer and work for a competitor.

Ferguson’s announcement follows a probe into the practice that Ferguson and 10 other state attorneys general announced July 9.

“Most workers have no idea they’re subject to this,” Ferguson said. “My goal is to eliminate no-poach clauses in the fast food industry in Washington state.”

No-poach agreements suppress wages by reducing job opportunities, he said. A business may be less willing to give raises when a shortage of available jobs keeps workers from leaving their employer, he said.

The companies agreed to end their no-poach practices rather than face an antitrust lawsuit by the state, Ferguson said. He filed with a state court agreements signed by representatives for the businesses. They deny in the agreements that their no-poach practices are a “restraint of trade” that disrupts the labor market.

The restaurant industry has more turnover than others, making it harder to offer higher wages, Ed Shanahan, executive director of Dunkin Donuts Independent Franchise Owners, told Bloomberg Law. Other employment issues are a greater concern for business owners than no-poach agreements, including minimum wage increases, paid leave, and worker scheduling requirements, he said.

“Often times I would think these attorney generals have never signed the front of a paycheck,” Shanahan said. “When you have to earn the profit in order to pay yourself after you pay everybody else, that’s a little bit of a horse of a different color.”

(Updated with additional reporting throughout.)

To contact the reporter on this story: Jon Steingart in Washington at jsteingart@bloomberglaw.com

To contact the editor responsible for this story: Terence Hyland at thyland@bloomberglaw.com

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