McDonald’s, Arby’s, Jimmy John’s and four other national restaurant chains have agreed, under threat of a lawsuit by Washington state, to drop provisions in their franchise agreement that prohibit franchisees from recruiting fellow franchisees’ employees.
The agreement obligates the chains to drop the so-called anti-poaching stipulation from the franchise agreements used in Washington within 120 days, according to the state’s attorney general, Bob Ferguson. A statement from his office says the agreement mandates that contracts used in other states be appended as the agreements come up for renewal with local operators.
Failure to uphold the deal will result in civil actions against the nonconformers, according to Ferguson.
His office noted that McDonald’s went a step further and agreed to stop enforcing the no-poaching provision of its franchise agreements immediately and to remove the no-poaching language from new contracts within 60 days.
The agreements are legally binding, according to Ferguson, whose office had threatened to file lawsuits against the restaurant brands if they continued to embrace a no-poaching policy. Ferguson has maintained that the provisions prevent restaurant employees from switching to higher paying jobs, a violation of the state’s Consumer Protection Act.
“Companies must compete for workers just like they compete for customers,” Ferguson said in a statement. “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 agreements came days after the attorneys general of 10 states and the District of Columbia alerted eight franchised chains that an investigation into the use of no-poach provisions was underway. A letter from the state’s chief legal officers asked the brands to provide detailed information about the particulars, as well as results of incorporating the no-hire language in their standard franchising contracts.