March 18, 2019
North Carolina Attorney General Josh Stein took an important step forward in protecting both businesses and workers this week by announcing a new multi-state settlement that prohibits several major fast food companies from forcing their employees to sign “no-poaching” agreements — or contracts that prohibit employees of one franchise from moving to another.
Public attention has been drawn to employers’ increasing use of non-compete agreements to keep their low-wage workers from taking other similar jobs in the same industry. One of the more infamous cases involves Jimmy John’s, which forced its front line sandwich makers to sign binding agreements promising not to work for a competitor sandwich-making company under certain circumstances. Although employers typically use non-competes to keep skilled employees from taking proprietary knowledge to a competing business, these kinds of restrictions for low-wage workers—who clearly lack such skills or knowledge — is nothing more than an effort to suppress wages by limiting these workers’ options.
Unfortunately, some industries have upped the ante from non-competes and are increasingly using another stealth tactic to limit employees’ job mobility: no-poaching agreements.
These agreements take non-competes one step further and prohibit employees of one franchise location from taking a job with another franchise of the same company. In other words, a McDonald’s in downtown Raleigh could prohibit an employee from leaving to work at a different McDonald’s franchise in Southeast Raleigh. Even more troubling, workers may not even be aware when accepting a job that future job opportunities are restricted by these agreements, which are signed between employers.
Because the fast food industry has become a chronic abuser of no-poaching agreements, on March 12, North Carolina joined 12 other states and the District of Columbia in reaching a settlement with Arby’s, Dunkin’ Donuts, Five Guys, and Little Caesars. Those restaurants have agreed not to include no-poaching clauses in their franchise agreements, to remove them from existing agreements, and not to enforce such clauses. Investigations are continuing into Burger King, Popeyes, and Panera.
This agreement follows a major effort by the Washington attorney general resulting in no-poaching clauses in franchise agreements nationwide with a wide range of companies, well beyond the fast food industry. The most recent agreement included Einstein Bros. Bagel, Express Employment Professionals, FASTSIGNS, L&L Franchising, The Maids, Westside Pizza and Zeek’s Pizza, bringing the total number of companies affected to 57.
Employees interested in learning their rights with respect to non-compete agreements can find information here.
Carol Brooke is a senior attorney with the N.C. Justice Center’s Workers’ Rights Project.