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10 states open investigation into restaurants’ ‘no poaching’ pacts

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The attorney generals of 10 states have opened an investigation into so-called no-poaching agreements, the stipulations in restaurant franchise agreements that prohibit franchisees from hiring the employees of other franchisees within the chain.  

The offices of the attorneys general sent a letter yesterday to eight national quick-service chains, asking for detailed information about their use of the agreements. The recipients were asked to specify the terms of those stipulations, including what specific positions are covered and the time frame of the hands-off language. Chains that don’t require franchisees to sign a no-poaching agreement are asked to specify when they stopped.

The letter was sent to officials of Arby’s, Burger King, Dunkin’ Donuts, Five Guys, Little Caesars, Panera Bread, Popeyes and Wendy’s. 

“We are concerned about the use of no poach agreements among franchisees and the harmful impact that such agreements may have on employees in our states and our state economies generally,” wrote Cynthia Mark, chief of the Fair Labor Division of Massachusetts’ attorney general’s office, which is leading the investigation. “By limiting potential job opportunities, these agreements may restrict employees’ ability to improve their earning potential and the economic security of their families. These provisions also deprive other franchisees of the opportunity to benefit from the skills of workers covered by a no poach agreement whom they would otherwise wish to hire. When taken in the aggregate and replicated across our States, the economic consequences of these restrictions may be significant.”

The letter cites a U.S. Department of the Treasury study that found 80% of the nation’s quick-service chains include a no-poach provision in their franchise agreements. The figure is 53% across all restaurant franchisors, according to New York Attorney General Barbara Underwood.

Joining Mark in signing the letter were labor officials from the attorney general’s offices of California, Illinois, Maryland, Minnesota, New Jersey, New York, Oregon, Pennsylvania and Rhode Island. A representative of the attorney general for the District of Columbia was also a signee. 

The reactions of the eight recipients of the letter were not available as of post time. 

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