Articles Tagged with non-compete lawyer

New Jersey employees of four different fast-food chains won a significant victory last month when it was announced that they would no longer use or enforce “no-poach” contracts or agreements to restrict their employees.  The chains – Dunkin’, Five Guys, Arby’s, and Little Caesar’s – came to formal agreements with the State of New Jersey to end the practice.  These agreements were made in the wake of an investigation into the practice, launched by the Attorneys General of 13 states, including New Jersey. New Jersey’s Attorney General Gurbir Grewal released a statement regarding the agreements, saying “I am glad that Arby’s, Little Caesar, Five Guys and Dunkin’ now recognize the unfairness of no-poach agreements and will stop using them, and I am proud of the multistate investigation that led to their change of heart.”

The particular agreements at issue here restricted fast-food employees from leaving their employment to work for a different franchise of the same fast-food company.  For example, a cashier at a Dunkin’ in New Brunswick would be restricted from working as a cashier at a Dunkin’ in Trenton.  Upon applying to the Trenton location, the prospective employee would disclose their previous employment at the New Brunswick location, causing the Trenton location to deny the employee’s application.  This can be particularly harmful when, for example, the New Brunswick cashier applies for a vacant store manager position at the Trenton location because there was no managerial position open at the New Brunswick location.  In this case, the no-poach agreement doesn’t just stifle competition, it harms the individual employee by denying them an opportunity to advance their career and increase their earning potential.

The rationale supporting these agreements, ostensibly, is a need to protect the resources expended on training the departing employee.  Without these agreements, the fast-food companies argue, franchisors would be damaged as they would not be able to recoup the investment they made in the employee.  Additionally (though this is not one of their stated rationales) these agreements provide substantial benefit to franchisors by reducing wages and depressing wage growth. By outlawing an employee from working for another franchisor, the franchisor in question insulates themselves from competing with that franchisor.  There is no concern that an employee will go to the competitor for better pay, so there is no incentive to offer better pay.  This is an insidious result of no-poach agreements, and one of the main reasons they have come under so much scrutiny in recent years.  This is closely related to the concern that no-poach agreements may also run afoul of Federal anti-trust law, as the franchisors could be viewed as colluding to fix wages.

New Jersey is taking a stand against the unreasonable of non-compete agreements and other restrictive covenants in the fast food industry. New Jersey has joined a group of states leading an investigative charge against several corporations in the fast food industry for the utilization of no-poach and non-compete agreements. While non-compete agreements are common in a wide variety of industries in which the companies could show they have a protectable interest in restricting an important and/or high wage earner, this is rarely this case in the fast food industry. Because of this, the New Jersey Attorney General has decided to address the issue.

Non-compete agreements are a type of restrictive covenant where an employer restricts an employee from working in a particular industry for a definite period of time after the separation of their employment. Non-compete agreements often seek to restrain employees from working for specific competitive companies, while others prohibit the employee from working in the entire industry for a particular period of time. When these agreements are in place, they leave employees with only two options: attempt to move up the ranks of their own individual franchise location or find work in a different industry. Plaintiff-side employment lawyers often argue that non-competes damage labor competition within particular industries, suppress wages, restrict an employee’s earning potential and cause damage to a state’s economy. Defense-side employment lawyers argue that their employer clients extend substantial resources in employees that is worthy of protection for a period of time.

The corporations involved in the New Jersey investigation include Burger King, Dunkin’ Donuts, Five Guys Burgers and Fries, Little Caesars, Wendy’s, Arby’s, Popeye’s Louisiana Chicken and Panera Bread. The large size corporations allow them to nearly dominate the fast food industry, which heightens the impact that the non-compete agreements have on fast food employees. Fast food employees are particularly at risk of being damaged by restrictive covenants because of the trend of low wages and a common lack of resources available to them. These employees usually lack high levels of education and can be desperate for work. They typically do not have access to attorneys who can review their employment agreements or explain their protected rights. Because of this, New Jersey along with other states are attempting to address the harmful policies in order to protect the rights of vulnerable individuals.