When Competition Meets Labor: The Washington Attorney General’s Initiative to Eliminate Franchise No-Poaching Provisions

In January 2018, the Washington Attorney General launched an initiative to eliminate no-poach clauses in franchise agreements nationwide. These particular no-poach provisions were covenants in franchise agreements that restricted employee mobility among locations within the same system. By restricting franchise entities’ ability to hire or recruit new employees, no-poach provisions decreased competition for the labor of franchise employees. This decrease in labor competition had the potential to reduce opportunities, as well as stagnate wages, benefits and working conditions. Viewing these clauses as naked restraints of trade — in the form of price fixing and market allocation — Washington challenged these provisions as being per se illegal. Washington’s industry-wide investigation resulted in legally binding agreements with about 235 corporations to immediately stop enforcing and eliminate no-poach clauses from franchise agreements nationwide. These corporate chains include nearly 200,000 locations nationwide who collectively employ millions of workers across the United States.

By Rahul Rao¹

I. INTRODUCTION

Starting in January 2018 and continuing for a little over two years, Washington State championed an initiative to permanently end the nationwide use of franchise no-poach clauses. This initiative was a success. And through its efforts, Washington eliminated no-poach clauses from about 235 corporate chains, representing nearly 200,000 locations across