Mass., 10 other states probing fast-food industry policy that stops workers from changing jobs
WASHINGTON — Eleven state attorneys general are launching an investigation of contracts at fast-food chains that prevent their workers from switching franchises, targeting a practice some economists say drags down wages for millions of Americans.
The group will send letters to eight fast-food companies — including Burger King, Dunkin’ Donuts, Panera, and Wendy’s — requesting information about ‘‘no-poaching’’ agreements that bar or restrict managers from hiring workers at another store in the same chain.
‘‘No-poach agreements unfairly limit the freedom of fast-food and other low-wage workers to seek promotions and earn a better living,’’ said Massachusetts Attorney General Maura Healey, whose office is leading the probe.
No-poaching clauses have come under increasing scrutiny by Democrats and some policy experts over the past several years as wage growth remains a persistent weakness for an otherwise strong and growing economy.
Economists say barring employees from switching chain locations unfairly prevents them from bargaining for higher wages, while businesses maintain they are necessary for local firms to recoup the costs of their investments in personnel.
‘‘Many workers only learn these agreements exist when they are denied the chance to advance to a better job, earn more money, or obtain family-friendly schedule options’’ at a different franchise location, Pennsylvania Attorney General Josh Shapiro noted.
Democratic Senators Cory Booker, of New Jersey, and Elizabeth Warren, of Massachusetts, said in March that they would introduce legislation to make no-poaching agreements illegal, calling them anti-competitive. A Booker policy aide estimated 70,000 fast-food restaurants would be affected by the bill, which has been dead-on-arrival in the Republican-controlled Congress.
The US Department of Justice’s antitrust division has also opened an inquiry. A letter to be sent by the state attorneys general asks the companies for a range of information about the no-poaching policy, including which employees have been subject to no-poach clauses and whether the workers were told of the restrictions.
About 80 percent of fast-food workers are constricted by no-poaching clauses, according to Healey’s office. The other fast-food chains targeted by the states’ investigation are Arby’s, Five Guys Burgers and Fries, Little Caesars, and Popeyes Louisiana Kitchen.
Industry advocates maintain the practice is important for protecting their investments.
‘‘Provisions in franchise agreements allow franchise owners to protect the significant financial investments they make to train employees the skills and methods necessary to deliver the product or service to customers,’’ Matthew Haller, a spokesman for the International Franchise Association, said when Booker’s legislation was introduced.
The efforts to tamp down on no-poach clauses also reflect concerns about the role of ‘‘monopsony’’ power — a monopoly held by a purchaser or employer, rather than by a seller — in restraining wages. Paychecks for most American workers have stagnated, despite low unemployment and high economic growth, leading some economists to blame weaker union rights and other constraints on workers’ power.
Fast-food employees often sign contracts not knowing these provisions prevent them from working at their chain’s other locations.
‘‘By limiting workers’ outside options, a no-poaching agreement reduces worker bargaining power,’’ Princeton University economists Alan Krueger and Orley Ashenfelter said in a 2017 research paper cited by the attorneys general. ‘‘ . . . It might help explain a recent puzzle in the US job market: unemployment has reached a 16-year low and job openings are at an all-time high, yet wage growth has remained surprisingly sluggish.’’
The practice is not limited to fast-food chains. Jiffy Lube, H&R Block, and Anytime Fitness are among the companies that have had no-poaching clauses in their franchisee contracts, according to Krueger and Ashenfelter.
Along with Healey of Massachusetts, attorneys general in California, the District of Columbia, Illinois, Maryland, Minnesota, New Jersey, New York, Oregon, Pennsylvania, and Rhode Island are part of the states’ investigation.