Mike Mozart / Flickr
In a year’s time, the country’s biggest chains have agreed to let workers move between franchises. Why were they stuck there in the first place?

Issues Labor Policy Systems

The fast-food industry brings in hundreds of billions in revenue every year. And yet the country’s 4 million fast-food workers make, on average, $300 per week before taxes—a sliver of what most Americans earn. Twenty percent of fast-food workers live in poverty. And, as we’ve reported, across the country, they’re often on food stamps.

There are many, many reasons why those wages are low. At least to some extent, it’s because fast-food workers can’t unionize. But there’s something else happening in fast-food—or at least, was happening, until a spate of lawsuits from states’ attorney generals started putting an end to it last year. It’s the clauses in worker contracts generally referred to as “no-poach,” meaning workers cannot be hired away by competing fast-food chains.

In 2017, Rachel Abrams, a reporter for The New York Times, broke a story about the no-poach clause—at that point, an obscure detail buried in most fast-food franchise agreements. Abrams highlighted that the country’s biggest fast-food chains—32 of them, including McDonald’s, Burger King, Carl’s Jr., Dominos, and Pizza Hut—prohibited their franchisees from hiring workers away from one another. As Eater put it, that meant a cook at Burger King couldn’t “take a job at another BK location across town to make 50 cents more an hour, nor can they use that prospect as a bargaining chip to get a raise.”

The most galling thing about no-poach clauses was that, unlike non-competes, fast-food workers often had no idea of the restrictions.
When Abrams wrote that story, those agreements were in play at over 70,000 restaurants, which was more than a quarter of all fast-food outlets in America. No-poach clauses weren’t unique to the restaurant industry—around 30 million American workers are under some sort of noncompete agreement, including yours truly. But they were practically ubiquitous in fast-food, Abrams later reported. McDonald’s had no-poach clauses in place for over 30 years.

That restriction began to change after Abrams highlighted the work of two Princeton economists, who’d found that the clauses were effectively locking workers into low-wage jobs as part of a study of the industry. Those “ubiquitous” provisions limited competition and turnover, which kept wages down. Workers were stuck in one place—which is a proven way to avoid getting a raise.

Indeed, a woman who ended up suing McDonald’s over the agreement said that, after working at the same Florida franchise for seven years, she thought she was on track for a promotion or even her own franchise—opportunities that she alleged were foreclosed by the no-poach clause.

The most galling thing about no-poach clauses was that, unlike non-competes, which employees willingly sign, fast-food workers often had no idea of the restrictions. That’s because they don’t appear in a contract that employees sign, but are in another contract—that between the corporation and franchisee. As a result, some workers didn’t even know about them until they tried to take another job—as was the case of a Massachusetts McDonald’s worker who was blocked from accepting a higher-paying job at another franchise.

Abrams’ article, and the Princeton study, set off big changes in the industry. In March 2017, three months before it was hit with a class-action lawsuit, McDonald’s informed its franchisees, who owned more than 11,000 locations, that it would no longer enforce the rule, Abrams reported. Then in the summer of 2018, the Washington state attorney general announced agreements with 15 fast-food chains to remove no-poach clauses from their contracts with franchisees. The AG had begun investigating them after reading Abrams’ article. Last month, four more fast-food chains agreed to remove the clauses, too.

At last tally, 23 fast-food chains have removed the clauses, which means millions of workers at more than 67,000 restaurants are now a little bit freer. We’ll be following this story as the dominoes—and Papa John’s, which is fighting to dismiss three no-poach lawsuits in court—continue to fall.

Sam Bloch

Sam Bloch has written about arts, culture, and real estate for publications including The New York Times, L.A. Weekly, and Artnet. His essay about Los Angeles' "shade deserts" will be published by Places Journal this spring. Reach him by email at: samuel.bloch@newfoodeconomy.org

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