AG Ferguson announces major milestones in initiative to eliminate no-poach clauses nationwide, files lawsuit against Jersey Mike’s

Initiative extends beyond fast-food industry as Valvoline, Anytime Fitness, Planet Fitness, Circle K and others agree to eliminate no-poach clauses nationwide 

Attorney General Bob Ferguson filed a lawsuit against national restaurant chain Jersey Mike’s after it refused to remove no-poach clauses from its franchise contracts.

In order to avoid a lawsuit from Ferguson, seven more corporations committed to eliminate the use of no-poach clauses nationwide, Anytime Fitness, Baskin Robbins, Circle K, Domino’s, Firehouse Subs, Planet Fitness and Valvoline.

No-poach clauses appear in franchise agreements between owners of fast-food franchises and corporate headquarters. The clauses prohibit employees from moving among restaurants of the same corporate chain, a practice that economists believe stagnates wages.

Thirty chains have now signed legally enforceable agreements with the Washington State Attorney General’s Office to remove no-poach clauses from franchise contracts since Ferguson began his initiative to eliminate no-poach clauses nationwide. These 30 corporations are removing no-poach clauses from franchise contracts at more than 85,000 locations.

This action extends Ferguson’s initiative beyond fast-food chains for the first time. Anytime Fitness, Circle K, Planet Fitness and Valvoline are the first non-restaurant chains to sign legally binding agreements to eliminate no-poach clauses.

With this announcement, Ferguson also moves closer to his goal of eliminating no-poach clauses in the fast-food industry nationwide. Jersey Mike’s is one of two remaining fast-food chains in Washington at which the Attorney General’s investigation uncovered the use of no-poach clauses in franchise contracts. Quiznos is the remaining fast-food chain of which the Attorney General’s Office is aware in Washington.

Jersey Mike’s is the first corporation Ferguson or any other state attorney general has sued for using no-poach clauses.

“No-poach clauses are an example of a rigged system that illegally harms workers,” said Ferguson. “My goal is straightforward — eliminate them nationwide. Like Jersey Mike’s, corporations that refuse to eliminate no-poach clauses can expect a lawsuit from my office.”

Attorney General Bob Ferguson Image courtesy Washington State Office of the Attorney General

Attorney General Bob Ferguson
Image courtesy Washington State Office of the Attorney General

Attorney General’s lawsuit against Jersey Mike’s

Attorney General Ferguson’s lawsuit, filed in King County Superior Court, asserts that Jersey Mike’s violated antitrust provisions of the state Consumer Protection Act for years through its use of no-poach clauses to restrict competition for labor.

The Attorney General asks the court to order Jersey Mike’s to stop using no-poach clauses in current and future contracts at its 38 locations in Washington state and more than 1,300 locations nationwide. Jersey Mike’s could face civil penalties up to $500,000 for the violation. The Attorney General’s Office will also seek to recover its costs and fees for having to bring the litigation.

Ferguson offered Jersey Mike’s the opportunity to avoid a lawsuit without paying any money at all, either in penalties, restitution, costs or any other purpose. To avoid a lawsuit, Jersey Mike’s needed to sign a legally enforceable commitment to eliminate its no-poach clauses in franchise contracts nationwide – the same terms accepted by 30 corporations and counting. Jersey Mike’s refused Ferguson’s offer.

Jersey Mike’s violated the law for years by maintaining and enforcing no-poach clauses in its franchise contracts. After the Attorney General’s Office began investigating Jersey Mike’s use of no-poach clauses, Jersey Mike’s asserted that it stopped enforcing the no-poach clauses in its franchise contracts. However, ceasing unlawful conduct does not prohibit the Attorney General from seeking penalties for previous unlawful conduct. In addition, Jersey Mike’s refused to affirmatively remove the no-poach clauses from its existing contracts. Whether or not a company enforces these provisions, their existence in current contracts remains unlawful.

Additionally, Jersey Mike’s has refused to sign a legally binding agreement with Ferguson’s office. Without a legally binding agreement in place, the company can return to using or enforcing the unlawful provisions in the future.

Extending anti-no-poach campaign beyond fast-food

To avoid a lawsuit, seven more corporations agreed to eliminate no-poach clauses nationwide in legally enforceable agreements filed in King County Superior Court today, Anytime Fitness, Baskin Robbins, Circle K, Domino’s, Firehouse Subs, Planet Fitness and Valvoline.

This group includes the first corporations outside the fast-food industry anywhere in the country to enter into legally enforceable agreements with Ferguson or any other state attorney general to end no-poach practices.

These seven corporations will remove no-poach language from their contracts, and no longer enforce no-poach provisions currently included in franchise agreements at nearly 20,000 locations nationwide where hundreds of thousands of workers are employed.

Anytime Fitness (65 Washington locations, estimated 2,559 locations nationwide)

Baskin Robbins (80 Washington locations, estimated 2,560 locations nationwide)

Circle K (48 Washington locations, estimated 5,082 locations nationwide),

Domino’s (137 Washington locations, estimated 5,587 locations nationwide)

Firehouse Subs (9 Washington locations, estimated 1,112 locations nationwide)

Planet Fitness (26 Washington locations, estimated 1,495 locations nationwide)

Valvoline (33 Washington locations, estimated 1,127 locations nationwide)

The companies are now legally obligated to immediately stop enforcing no-poach clauses and stop adding the language to new franchise contracts. To ensure these changes occur nationwide, the companies must notify all independent franchise owners of these new requirements.

The companies must remove any language from existing contracts in Washington within 60 to 120 days. At locations outside of Washington state, the companies must remove no-poach clauses as contracts come up for renewal.

Baskin Robbins ended no-poach provisions in 2014, but still prohibited employees from moving between corporate and franchise locations. Domino’s stopped enforcing its no-poach clauses after the Attorney General’s investigation began earlier this year, but had not removed them from its franchise contracts. The companies are now legally bound to end all uses of the provisions and remove them from franchise contracts.

Background on Ferguson’s initiative to eliminate no-poach clauses

As a result of Ferguson’s initiative to eliminate no-poach clauses, 30 chains have signed legally binding commitments to end no-poach practices nationwide at more than 85,000 locations. The changes benefit millions of workers across the U.S.

The initiative began with a September 2017 article in the New York Times titled “Why Aren’t Paychecks Growing? A Burger-Joint Clause Offers a Clue.” The article focused on the downward pressure no-poach agreements among fast-food franchises place on wages. After reading the article, Solicitor General Noah Purcell referred the subject to Attorney General Ferguson. The article cited research by Princeton economists Alan Krueger and Orley Ashenfelter highlighting the harms to workers caused by the practice.

Professors Krueger and Ashenfelter examined franchise agreements for 156 of the largest franchise companies in the United States. The franchise agreements for companies with more than 500 locations operating in the U.S. were analyzed for any language “restricting the recruitment and hiring of employees from other units within the franchise company.”

The economists assert that “no-poach” clauses reduce opportunities for low-wage workers and stagnate wages, harming workers in Washington and across the nation.

In January, Ferguson’s Antitrust Division launched an investigation into no-poach clauses. The Attorney General’s Office investigated the corporations on the economists’ list to determine which fast-food companies used no-poach clauses and were present and employed people in Washington. Out of the original restaurants the Antitrust Division contacted, three chains, Hissho Sushi, Long John Silver’s and Wendy’s, did not use no-poach provisions in their franchise contracts. In addition to the seven companies announced today, Ferguson negotiated an end to no-poach practices with seven fast-food chains in July, eight additional chains in August and an additional eight chains in September.

In September, Ferguson announced that he was expanding his investigation to industries beyond fast-food restaurants. Ferguson also announced that he was beginning to investigate fast-food chains that economists Krueger and Ashenfelter did not include in their analysis because they have fewer than 500 stores nationwide.

The investigation now continues across several industries that utilize no-poach clauses in their franchise contracts:

Hotels

Car repair services

Home healthcare services

Cleaning services

Convenience stores

Tax preparation

Parcel services

Electronics repair services

Child care

Custom window covering services

Travel services

Insurance adjustor services

Since the investigation began in early 2018, Ferguson’s Antitrust Division has successfully negotiated an elimination of no-poach clauses at 30 companies nationwide, including the seven announced today.

Senior Assistant Attorney General Jonathan Mark and Assistant Attorneys General Eric Newman and Rahul Rao of the Attorney General’s Antitrust Division are leading the no-poach initiative.

The Office of the Attorney General’s Antitrust Division is responsible for enforcing the antitrust provisions of Washington’s Unfair Business Practices-Consumer Protection Act. The division investigates and litigates complaints of anticompetitive conduct and reviews potentially anticompetitive mergers. The division also brings actions in federal court under the federal antitrust laws. It receives no general fund support, funding its own actions through recoveries made in other cases.

The Antitrust Division investigates complaints about potential anti-competitive activity. For information about filing a complaint, visit https://fortress.wa.gov/atg/formhandler/ago/AntitrustComplaint.aspx.

– Office of the Attorney General