State Attorney General Bob Ferguson has announced that in order to avoid a lawsuit from his office, seven large, corporate fastfood chains will immediately end a nationwide practice that restricts worker mobility and decreases competition for labor by preventing workers from moving among the chains’ franchise locations. The companies will no longer enforce provisions included in franchise agreements that stop workers from moving to potentially better positions and wages, and will remove the language from current and future contracts.
Economists believe that practices that decrease competition, like the “no-poach” language that Ferguson urged these companies to remove, lead to wage stagnation. No-poach provisions appear in lengthy franchise agreements that owners of fast-food franchises sign with corporate headquarters. Employees are often unaware the provisions exist. In effect, the provisions prohibit employees from moving among restaurants of the same corporate chain – for example, prohibiting one Carl’s Jr. employee from accepting employment from another Carl’s Jr. franchise location for higher pay.
The state Consumer Protection Act prohibits “unreasonable restraints of trade,” which applies as much to the labor market as it does to the burger market. Because employees cannot move to another location within their corporate brand, their current location may have less incentive to give them raises. This practice harms workers not just in Washington state, but nationally.
Ferguson negotiated legally binding agreements, known as assurances of discontinuance, whereby these corporations would agree to end these restrictions on workers nationwide in order to avoid a lawsuit from the Washington State Attorney General’s Office.
The seven fast-food chains agreed to stop this practice not only at their 500 Washington locations, but nationally. Tens of thousands of low-wage employees will be affected across the United States at more than 25,000 locations.
“Companies must compete for workers just like they compete for customers,” said Ferguson. “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 following companies agreed to end the practice:
- Arby’s (57 Washington locations, estimated 3,283 locations nationwide),
- Auntie Anne’s (28 Washington locations, estimated 1,229 locations nationwide),
- Buffalo Wild Wings (16 Washington locations, estimated 1,214 locations nationwide),
- Carl’s Jr. (33 Washington locations, estimated 1,168 locations nationwide),
- Cinnabon (25 Washington locations, estimated 836 locations nationwide),
- Jimmy John’s (127 Washington locations, estimated 2,774 locations nationwide), and
- McDonald’s (271 Washington locations, estimated 16,193 locations nationwide).
As a result of the assurances of discontinuance, filed in King County Superior Court, the franchisors are now legally obligated to stop including no-poach language in their new agreements and must remove any no-poach provisions in existing franchise agreements on a national scale.
If any of the seven fast-food chains violate any of the terms, the company will be subject to civil penalties. All seven companies cooperated in Ferguson’s investigation. Ferguson is investigating other corporate chains that utilize no-poach agreements and expects that more fast-food corporations will agree to remove any current and future no-poach provisions from their contracts. If other companies do not remove their no-poach provisions, Ferguson is prepared to file lawsuits.
The Antitrust Division investigates complaints about potential anti-competitive activity. For information about filing a complaint, visit https://fortress.wa.gov/atg/