New Jersey, Other States Investigate “No-Poach” Agreements Among Fast Food Franchisees

Antitrust laws protect both consumers and employees from anti-competitive practices. These laws are an essential part of any free market system. Monopolies and other accumulations of wealth or influence almost invariably lead to restraints on trade that harm both businesses and individuals. A single company that holds a monopoly over a particular product or geographic area has little to no incentive to set prices based on the conditions of the market. Companies that agree to fix prices do similar harm to competitors and consumers. Employees rely on a competitive job market, which enables them to seek out better opportunities with other employers. Some employers may attempt to restrain the mobility of their employees by entering into agreements with other companies to refrain from recruiting or hiring one another’s employees. These are commonly known as “no-poach” agreements, and they can have a major impact on employees. New Jersey’s Attorney General recently announced that, along with several other states, it is investigating alleged no-poach agreements among fast-food franchisees.

When employers enter into no-poach agreements, employees may find themselves unable to advance in their chosen careers. Workers cannot seek to move to a higher position, often with higher pay, at another company if that company has agreed ahead of time not to hire them. They are therefore at the mercy of their current employers. A press release from the New Jersey Attorney General quotes the state’s Labor Commissioner, who stated that no-poach agreements can keep workers from looking for jobs with better pay, better opportunities, or a better location. These agreements therefore “exploit low-wage workers who are most in need of job protections.”

The Antitrust Division of the U.S. Department of Justice (DOJ) has conducted its own series of investigations into alleged no-poach agreements over the past few years. In an April 2018 update, it noted that competitive markets for employees and jobs are subject to “the same rules” as consumer-oriented markets for goods and services. This applies both to no-poach agreements and wage-fixing agreements, in which employers agree to set a range or upper limit for employee compensation. The DOJ announced a plan in late 2016 to pursue criminal antitrust charges against companies that use “naked” no-poach and wage-fixing agreements, i.e. agreements that “are not reasonably necessary to any separate, legitimate business collaboration.”

A 2016 study by the U.S. Department of the Treasury reviewed about forty franchise contracts, and found that up to eighteen percent of U.S. workers—about thirty million people—might be subject to no-poach agreements. The investigation by the New Jersey Attorney General and other states focuses on businesses that operate fast-food franchises, where no-poach agreements are believed to be even more common. The NJ Attorney General’s press release cites a 2017 review of 156 fast-food franchise contracts, which reportedly found eighty percent to contain no-poach provisions. It joined with officials from New York, Massachusetts, several other states, and the District of Columbia in a letter requesting further information on franchise agreements from companies operating various well-known fast-food franchises.

If you are involved in a dispute with your employer in New Jersey or New York, the employment lawyers at the Resnick Law Group can help you. Please contact us online, at 973-781-1204, or at 646-867-7997 today to schedule a confidential consultation with a member of our knowledgeable and experienced team.

More Blog Posts:

New Jersey Bill Would Limit Enforceability of Noncompete Clauses and Other Restrictive Covenants in Employment Contracts, The New Jersey Employment Law Firm Blog, June 26, 2018

New York Court Declines to Enforce Non-Compete Clause Against Former Employees, The New Jersey Employment Law Firm Blog, June 15, 2018

New Jersey Judge Rules for Former Employee in Dispute Over Noncompete Clause, The New Jersey Employment Law Firm Blog, April 26, 2018

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