A worker inspects burger buns traveling along the production line. (Photographer: Jason Alden/Bloomberg)

Burger King, Pizza Hut Agree to Stop Using ‘No-Poaching’ Pacts

(Bloomberg) -- Eight fast-food chains including Burger King, Pizza Hut, Papa John’s and Denny’s will no longer enforce “no-poaching” pacts that require their franchisees not to hire away each other’s employees, under the terms of settlements filed in court by Washington state’s attorney general.

The eight chains join 15 others -- among them McDonald’s and Carl’s Jr.-- which had agreed to similar terms in recent months. Together, the agreements ban enforcement nationwide of no-poaching agreements among most of the major fast-food companies that have a presence in Washington, the state’s attorney general, Bob Ferguson, said in an interview Thursday.

The 23 chains that have settled account for more than 67,000 U.S. locations and have millions of workers among them, according to the attorney general’s office. Ferguson said that along with investigating other fast-food companies, he was broadening his focus, investigating the use of no-poaching agreements in other industries like hotels. Some fast-food companies have resisted changing their practices as they contend with an escalating employee turnover rate and slower customer traffic.

“This train’s only going in one direction: We’re going to eliminate these no-poach agreements across the board, industry by industry,” Ferguson said. “We’re not going to stop until they’re gone.”

No-Poach Deals

Ferguson said he told the fast-food companies he’d sue them unless they agreed to end enforcement of no-poach deals nationwide. The attorney general is still investigating five other fast food companies, including Domino’s and Baskin-Robbins, which have not agreed to a settlement, according to his office.

Tim McIntyre, a spokesman for Domino’s, said the company had never taken action to enforce the non-solicitation provision, so not only removed it but also released franchisees nationwide from any obligation to comply with it.

“We informed the attorney general’s office of this and are in active discussions with them,” McIntyre said in an emailed statement. “At this point, we don’t understand why these actions have not satisfied their concerns.”

‘Constructive Solution’

Restaurant Brands International, which owns the Burger King, Popeyes and Tim Hortons chains, said it’s worked closely with state officials to find a “constructive solution.”

“Effective Sept. 6, 2018, none of our new franchise agreements for our brands across North America include no-solicitation and no-hiring provisions,” the company said Thursday in a statement. “We have also notified our existing North American franchisees that we will no longer enforce these provisions in existing franchise agreements.”

Papa John’s and Pizza Hut had discontinued no-poach practices within the last year, while another chain, A&W, ended its use of the hiring restrictions shortly after Ferguson launched his investigation, according to his office.

No-poach deals, along with other allegedly anticompetitive practices like requiring employees to sign “non-compete” agreements, have come under greater scrutiny in recent years from advocates and elected officials who argue they depress wages by undermining workers’ bargaining power.

Business leaders have said that green-lighting worker poaching exacerbates difficulties they already experience finding and retaining staff.

“You can’t keep squeezing small business, especially in such a tight labor market, and not expect problems on the other end,” Dunkin’ Donuts Independent Franchise Owners executive director Ed Shanahan said in July.

©2018 Bloomberg L.P.