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Booker, Warren Sound Alarm on Collusive “No-Poach” Agreements

Despite existing DOJ guidance, majority of largest franchisors use anti-competitive agreements, potentially suppressing workers’ wages, job mobility

November 21, 2017
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WASHINGTON, D.C. – United States Senators Cory Booker (D-NJ) and Elizabeth Warren (D-MA) today raised concerns about recent reports of collusion between franchise corporations and their franchisees that may be suppressing workers’ wages and job mobility. In a letter to Attorney General Jeff Sessions, the senators urged the Department of Justice (DOJ) to crack down on these “no-poach” agreements, which prohibit franchisees from hiring away workers employed by another franchisee.

“The pervasiveness of these practices, which undoubtedly restrict competition in the labor market, is deeply concerning,” wrote the senators. “The Department, through its role in enforcing federal antitrust laws, has a critical role to play in ensuring that anticompetitive practices do not stifle our labor market and prevent workers from reaching their full earnings potential.”

In December 2016, DOJ issued guidance that agreements among employers “not to recruit certain employees” or “to refuse to solicit or hire that other company’s employees (so-called ‘no-poaching’ agreements)” are likely illegal. The DOJ stated its intention to pursue criminal felony charges against individuals and companies that have “agreed among themselves… not to solicit or hire each other’s employees.”   

Despite this guidance, a recent study found that 58 percent of the 156 largest franchisors, which operate nearly 340,000 franchise units, used some form of anti-competitive “no-poach” agreements, predominantly in low-wage and high-turnover industries, such as the fast-food industry.

The senators asked Attorney General Sessions to detail DOJ’s current interpretation of the 2016 guidance, as well as whether it is currently investigating the use of “no-poach” agreements among franchises, or pursuing legal action against franchisors for utilizing “no-poach” agreements. Additionally, Senators Booker and Warren asked what further action could be taken by Congress to curtail the use of these collusive agreements.

Dating back to his days as tenant lawyer, City Council member, and Mayor of Newark, Booker has been a leading voice for economic justice and the fundamental promise that if you work hard in America, America should work for you. As part of this commitment, Booker has been a vocal advocate for cracking down on corporate practices that depress wages and limit opportunity. Earlier this month, he introduced a bill targeting companies that outsource much of their labor costs to contractors and temp workers rather than hiring direct employees. He also recently pressed antitrust regulators on corporate concentration and the increasing trend of “monopsony” power, which limits worker mobility and depresses wages.

Full text of the letter is available here.