Some Fast Food Chains Drop Non-Compete Rules for Low-Wage Workers

Washington State Attorney General Bob Ferguson today announced that seven fast-food chains will cease enforcing non-compete agreements for employees at their franchises, both in the state of Washington and nationwide.

The chains include Arby’s, Auntie Anne’s, Buffalo Wild Wings, Carl’s Jr., Cinnabon, Jimmy John’s, and McDonald’s. Earlier, McDonald’s had made promises not to enforce the rules.

“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,” said a statement from the Attorney General’s office.

The companies will be subject to civil penalties if they violate the agreement.

The agreement with Washington State was separate from the action taken by eleven attorneys general earlier this week. On behalf of the group, the Massachusetts Office of the Attorney General sent letters to Arby’s, which was included today in the Washington settlement, and seven other chains to request documents related to “language (that) includes, but is not limited to, any ’employee non-competition,’ ‘no solicitation,’ and/or ‘no hire’ provisions.”

The seven other chains are Wendy’s, Five Guys, Burger King, Dunkin’ Donuts, Little Caesars, Popeyes, and Panera. They have until August 6 to respond to the information request from the attorneys general. They are not covered by the Washington settlement.

Labor Movement

A typical franchise agreement includes language that spells out how franchisees can interact with employees at other restaurants of the same name (but operated by different franchisees). Burger King, for example, states “Neither BKC nor Franchisee will attempt, directly or indirectly, to entice or induce, or attempt to entice or induce any employee of the other or of another Franchisee of BKC to leave such employment, or employ such employee within six (6) months after his or her termination of employment with such employer, except with the prior written consent of such employer.” Clauses in franchise agreements of other companies contain similar restrictions. Wendy’s, for example, has a year-long ban.

This isn’t new, unfortunately. In 2014 Huffington Post revealed that the sandwich chain Jimmy John’s forced all workers to sign non-compete agreements that prevented them for two years from working at any nearby restaurant which made 10% of its revenue from sandwiches. Subway did the same as far back as 2009.

But it’s become more pervasive in recent years as chains compete for workers.

Illinois Attorney General Lisa Madigan, who was among the 11 attorneys general pressing fast food franchises on the matter, said that “58 percent of major franchisors have no-poach provisions in their franchise agreements, and the number is even higher, at 80 percent, for fast food franchisors.“