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Four fast-food franchise corporations agree to nix ‘no-poach’ provisions

By Pamela Wolf, J.D.

Pursuant to settlement agreements with a coalition of states, Arby’s, Dunkin’, Five Guys, and Little Caesars will refrain from including “no-poach” provisions in U.S. franchise agreements.

A coalition of 13 states and the District of Columbia has entered into agreements with four major fast-food companies—Arby’s, Dunkin’, Five Guys, and Little Caesars—under which the franchise corporations are prohibited from continuing to employ “no-poach” policies. As a result of the settlement agreements announced on March 12, the franchise corporations will no longer include no-poach provisions in any of their franchise agreements in the United States.

“No poach” agreements. “No-poach” provisions are routinely included in franchise agreements for many fast food dining outlets. These provisions are also known as “no-solicitation,” “no-hire,” or “no-switching” agreements.

Many of these anticompetitive provisions required franchise operators to contractually agree to not hire or solicit the employees of another franchise operator. The impact on employees, many of whom are low-wage workers, is serious because many would be unable to seek better pay and benefits by going to work for a competing franchise. Even more troubling is that workers are frequently unaware of these provisions in the contracts.

Investigations resolved. The settlement agreements resolve the investigations of the Attorneys General of states that participated in a multistate review of no-poach policies. The AGs alleged that the course of conduct engaged in the by the fast-food franchise corporations may violate state antitrust laws. The same conduct also allegedly may amount to unfair methods of competition and/or unfair or deceptive acts or practices in the conduct of trade or commerce, in violation of state consumer protection laws, and may violate other laws governing the free exercise of the right to contract for employment.

The franchise corporations denied these allegations.

Participating states. The states participating in the settlements are: California, Massachusetts, Illinois, Iowa, Maryland, Minnesota, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, and the District of Columbia.

“Our economy thrives when everyone is doing well,” California Attorney General Becerra said in a statement. “No-poach agreements attempt to prevent competition and limit economic opportunity for hard-working Californians. The agreements announced today are an important step forward to protect our workers and our economy.”