No-poaching pacts under scrutiny

The State of Washington announced last month that seven fast food chains would end the practice of ‘no-poaching’ clauses in contracts with their franchisees across the U.S. ‘No-poaching’ agreements are typically between two companies that agree not to hire each other’s employees; in this case, they stipulate that franchises of the same corporation should not hire workers from one another. Threatened by a lawsuit by State Attorney General Bob Ferguson, restaurant chains like Arby’s, Auntie Anne’s, Buffalo Wild Wings, Carl’s Jr., Cinnabon, Jimmy John’s and McDonald’s agreed to stop the practice. “The companies will no longer enforce provisions included in franchise agreements that stop workers from moving to potentially better positions and wages, and will remove the language from current and future contracts,” said Mr. Ferguson. ‘No-poaching’ clauses are in sharp focus as the Donald Trump administration and Democratic States threaten action against companies for these. The U.S. economy is growing but the wages are not, and this has been an underlying reason for the political turmoil. Labour distress has contributed in good measure to the rise of the ‘Trump movement’. The Antitrust Division of the Department of Justice put companies “on notice” in April, recalling an announcement in October 2016 — during the Barack Obama presidency — that it intends to pursue criminal proceedings against violators. “When companies agree not to hire or recruit one another’s employees, they are agreeing not to compete for those employees’ labour. The same rules apply when employers compete for talent in labour markets as when they compete to sell goods and services. After all, workers, like consumers, are entitled to the benefits of a competitive market. Robbing employees of labour market competition deprives them of job opportunities, information, and the ability to use competing offers to negotiate better terms of employment,” it said in a statement.

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