November 21, 2017

Warren and Booker Raise Concerns Over DOJ Enforcement Against Franchises for Collusive "No-Poach" Agreements

Despite Existing DOJ Guidance, Majority of Largest Franchisors Use Anti-Competitive Agreements, Potentially Suppressing Workers' Wages & Job Mobility

Text of the letter (PDF)

Washington, DC - United States Senators Elizabeth Warren (D-Mass.) and Cory Booker (D-N.J.) 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 "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.

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 Warren and Booker asked what further action could be taken by Congress to curtail the use of these collusive agreements.