The End of The No-Poach Clause

This summer, 11 attorneys general investigated seven foodservice franchises suspected of maintaining no-poach clauses , a contract provision of dubious legality that prohibits franchisees from hiring employees who work at other locations within the franchise system. All seven of those franchises agreed in July to remove no-poach clauses from their contracts, a decision that may now be reverberating throughout the industry.

According to QSR Magazine, attorneys are increasingly targeting franchises with no-poach clauses , and that could affect the majority of foodservice franchises. QSR points to a September 2017 Princeton University paper that found 32 of the 40 largest quick-service restaurant chains in the U.S. have no-poach clauses in their franchisee contracts.

The increased scrutiny over no-poach clauses comes at a particularly inconvenient time for foodservice franchises, who area already contending with a growing labor shortage.

“Fast-food restaurants tend to have high turnover, in part because wages are relatively low,” said Alan Kruger, one of the paper’s authors. “I suspect that no-poaching agreements are of greater benefit to chains when turnover is high, and that they are a greater constraint on worker mobility in high-turnover industries, as well.”