8 Fast-Food Chains Will End ‘No-Poach’ Policies

Eight more restaurant chains have agreed to end a policy that blocks workers from switching jobs within the individual brands, becoming the latest companies to curtail a once-prevalent hiring practice that critics say depressed wages for some of the United States’ lowest-paid employees.

As part of agreements with the Washington state attorney general’s office Monday, Applebee’s, Church’s Chicken, Five Guys, IHOP, Jamba Juice, Little Caesars, Panera Bread and Sonic all agreed to remove a so-called no-poach clause from their contracts with franchisees.

The clauses prohibit a cashier at one Panera location, for example, from working at another Panera location.

Such restrictions are not unique to the restaurant industry, but until recently they were ubiquitous, particularly among fast-food chains. That began to change last year, after two prominent economists at Princeton produced a report that focused on how no-poach clauses could lock workers into low-wage jobs.

Bob Ferguson, the Washington state attorney general, began investigating the clauses after reading an article in The New York Times that examined their impact on the mobility of restaurant workers, one of the largest workforces in the country.

That investigation, which began in January, led to agreements with seven fast-food companies, including Arby’s, Carl’s Jr. and McDonald’s, to remove no-poach restrictions. Those agreements, and the ones announced Monday, will affect the companies’ operations nationwide, according to the attorney general’s office.

The office is continuing to look into the practices of other fast-food chains, Ferguson said in an interview. He declined to name the companies.

“The train’s left the station,” he said. “These corporations either get on board, or they’re going to end up in court. But there is no middle ground.”

On Monday, a spokesman for Dine Brands Global, the parent company of Applebee’s and IHOP, confirmed that earlier this year, both chains “decided that it was the right time to remove the provisions regarding employee poaching from each brand’s franchise agreements.”

A spokeswoman for Panera Bread declined to comment; the other chains did not respond to requests for comment.

Combined, the eight companies included in Monday’s announcement have more than 15,000 locations around the country. As part of their agreements with the attorney general’s office, the restaurants will no longer enforce existing no-poach agreements, and will remove the language from future contracts.

Unlike noncompete clauses, which employees are made aware of, people who work for fast-food companies might have no idea that they are limited in where they may work. No-poach restrictions are buried in thick contracts between corporate headquarters and franchisees, who collectively operate most of the major fast-food restaurants in the United States.

The study, by Princeton economists Alan Krueger and Orley Ashenfelter, estimated that the restrictions affected 70,000 individual restaurants in the United States, roughly a quarter of all fast-food locations. Their report examined franchise contracts at 40 companies, and concluded that the no-poach agreements appeared to exist mainly to limit competition and turnover.

Franchisees and other defenders of the practice argue that no-poach rules protect the time and money employers invest in hiring and training. But critics have argued that the restrictions also keep them from offering raises, since companies know that their workers are limited when it comes to taking new jobs.

The attorney general’s office said that Little Caesars largely removed no-poach clauses from its contracts last year, and that Applebee’s, IHOP and Jamba Juice ended the practice after Ferguson started the investigation. The agreements announced Monday make the commitments to end the practice legally binding.

Separately, attorneys general in 10 states have also begun their own investigation into no-poach agreements within the restaurant industry.