Seven fast food companies, including McDonalds, will end so-called no poach agreements, which some economists say can keep wages stagnant.
Seven fast food companies, including McDonald's, will end so-called "no poach" agreements, which some economists say can keep wages stagnant. Scott Olson/getty

Seven fast-food chains will end a practice that can lock their workers into low wages, Washington State Attorney General Bob Ferguson announced Thursday.

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The practice, known as a “no-poach agreement,” bars local franchise owners from hiring employees away from another franchise location of the same chain. For workers, that translates to an inability to, say, leave one McDonald's location for another if the other pays better.

But unlike non-compete agreements, no-poach agreements are signed between fast food companies and local franchise owners. That means workers may not even know such an agreement exists until they attempt to get a better paying job at another franchise location.

The use of no-poach agreements “creates an environment in which franchises no longer have to compete” and violates Washington state antitrust law, Ferguson said.

Such agreements have come under national scrutiny as some economists argue they can contribute to wage stagnation. Ferguson said Thursday his office began looking into the agreements last year after coverage in the New York Times. This week, 11 other attorney generals announced publicly they were investigating whether eight chain restaurants use the agreements.

Instead of facing a potential lawsuit from Ferguson's office, seven companies have now agreed to stop using the agreements.

In documents filed Thursday in King County Superior Court, Arby’s, Auntie Anne’s, Buffalo Wild Wings, Carl’s Jr., Cinnabon, Jimmy John’s, and McDonald’s acknowledge using the agreements and promise to discontinue them, though the companies do not admit they violated state law.

The companies agree to stop enforcing the no-poach provisions already in place in any location across the United States and to amend those in Washington state to remove the language from the franchise agreement. They also agree to stop using the provisions in any future franchise agreements.

Six of the seven companies have four months to prove they've changed their Washington franchise agreements. McDonald’s, which has already said publicly it will end the agreements, will have two months.

Ferguson said his office is investigating more companies, but would not say how many or which ones. He threatened to sue companies who don’t voluntarily comply, saying his goal is to end the use of the agreements in all Washington state restaurants.

“They know who they are,” Ferguson said. “They are now on the clock.”

“I’m prepared to litigate that issue,” Ferguson added. “Our state antitrust laws are very clear… You can’t rig the system to avoid competition.”

The seven agreements signed with Ferguson's office will affect “thousands” of workers in Washington and “many thousands” across the country, Ferguson said. The seven companies who’ve signed agreements with Ferguson’s office together have 557 locations in Washington and nearly 26,700 locations nationwide.

Seattle Jimmy John’s worker Merlee Sherman said during a news conference Thursday she wants to be able to move up to a management position in the company and move between stores. She said she should be able to use the skills she’s learned to train other employees at other franchise locations.

“Those of us who work in the food industry should be paid not only livable wages, but should be able to transfer our love and our skills,” she said.

Rachel Lauter, executive director of the worker advocacy groups Working Washington and Fair Work Center, called the agreements “fundamentally unfair.” Workers who fight for better pay are often told to “go get a better job,” Lauter said, but no-poach provisions can make that harder to do.

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Fully ending no-poach agreements could affect millions of low-wage American workers.

Nationwide, 3.6 million people work in food preparation or service, including fast food, making a mean wage of $10 an hour, according to the Bureau of Labor Statistics. In Washington state about 80,800 people work in those jobs, according to the BLS.

Princeton economist Alan Krueger, who has studied the agreements for 40 fast-food companies, told the New York Times the agreements affect more than 70,000 restaurants