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"No poaching" fast food franchise rules under scrutiny

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The New York attorney general, along with attorneys general from nine other states, are investigating so-called "no poaching" agreements between franchisees. These agreements prevent one franchise location from hiring employees already in the same chain.

The agreements, which are included in franchise contracts, are not always visible to employees, so employees may not be aware that a transfer to another location is prohibited.

The attorneys general are seeking copies of franchise agreements containing no-poaching clauses and all communications regarding enforcing it. They sent a letter to nine national fast food chains requesting the information.

Antitrust issues raised

While the letter only seeks information, the U.S. Department of Justice has previously announced that no poaching agreements in violation of federal law will be prosecuted. The first settlement from this policy came this year, when the DOJ antitrust division settled with Knorr-Bremse AG and Westinghouse Air Brake Technologies.

Several franchises agree to end no-hire agreements

Seven fast-food franchises have voluntarily agreed to stop including these agreements in their typical franchise contract. The seven national chains who have agreed to this could affect as many as 25,000 restaurants across the nation.

That attorneys general in states across the country are now investigating such agreements provides another significant warning for franchisees and others who have no poaching agreements in place. So far, the letter is the only action taken. However, several class-action lawsuits from workers have already been filed alleging that such agreements harmed employees in violation of antitrust rules.

It is a significant focus for many in employment law. Franchisees, employers and employees should be aware whether these developments affect them in any way.

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