Several More Restaurants Drop ‘No Poach’ Contract Clauses Following Threat of Lawsuit

August 22, 2018, 9:51 PM UTC

Several of the nation’s biggest restaurant chains have agreed to remove non-compete clauses from their worker contracts, freeing workers to seek better wages at competing restaurants.

Panera Bread, Sonic, Applebee’s, and Little Caesars are among the restaurants to drop these “no poach” clauses from their corporate contracts, Washington State Attorney General Bob Ferguson announced Wednesday. The other four restaurants are IHOP, Five Guys, Jamba Juice, and Church’s Chicken.

Combined, these eight restaurants have more than 15,000 locations nationwide.

In addition to removing the contract clauses within 90 to 120 days in the state of Washington, the chains will stop adding “no poach” provisions to new franchise contracts nationwide.

“Businesses can’t rig the system to avoid competition,” Ferguson said in a statement, noting that “no poach” clauses reduce labor competition and suppress wages for workers already toiling for minimum wage or close to it. He notes that workers often have no idea these clauses exist or pertain to them because the language appears in corporate contracts signed by franchisees, not individual workers at specific franchise locations.

But whether they are aware, workers are certainly impacted by these agreements. Because individual workers are restricted from moving to another restaurant location, their current location has little incentive to offer a promotion, or a raise to make wages more competitive with other franchise locations.

In July, Ferguson negotiated a similar deal with another seven restaurant chains, including McDonald’s, Arby’s, Carl’s Jr., Jimmy John’s, and Auntie Annie’s. At the time, Ferguson noted that “no poach” clauses violate antitrust provisions in Washington’s Consumer Protection Act. As a result, the fast food chains settled with the Washington state attorney general’s office in order to avoid a lawsuit.

Attorneys general in 10 other states and the District of Columbia worked together on the investigation that led to the July settlement, according to NPR. Pennsylvania’s Attorney General Joseph Shapiro noted that up to 80% of fast food chains use such agreements.

Economists also generally frown on such clauses being good for free market competition. Princeton University economist Alan Krueger, who studies “no poach” agreements, told NPR in July, “I think it’s very hard to come up with a sound business justification for this practice, other than reducing competition for workers.”

And Ferguson notes he isn’t done investigating other fast food chains possibly using these kinds of contract clauses. “My goal is to eliminate no-poach clauses in the fast-food industry nationwide,” he said in Wednesday’s statement.