Democratic attorneys general from 10 states and the District of Columbia are seeking copies of franchise agreements from eight fast-food operators for provisions that could restrict employees’ job mobility. Congress is considering bills to rein in noncompete agreements, especially those affecting low-wage workers.
“In theory, there can be an economic case for no-poaching agreements and noncompete agreements if employers spend lots of money training workers with skills they could take elsewhere,” says Matthew Johnson, an assistant adjunct professor with Duke University’s Sanford School of Public Policy, who studies how regulations affect the U.S. labor market and working conditions.
“If this were the case, though, we should see employers paying higher wages to workers that sign these contracts to compensate them for their reduced outside employment opportunities and their weaker bargaining position going forward. But we're not seeing that -- many workers signing these contracts are paid minimum wage and thus not earning any sort of wage premium.”
“Without a demonstrable wage premium, it is unlikely that employers are using these contracts in a `productivity-enhancing’ sense, but rather as a means to extract more money away from workers and suppress competition in the labor market. I think these state attorneys general are right to investigate these practices.”
Matthew Johnson is an assistant adjunct professor with Duke’s Sanford School of Public Policy who researches how regulations affect the U.S. labor market and working conditions. Johnson created case study teaching materials for the Harvard Business School. His working paper, “Why Are Low Wage Workers Signing Noncompete Agreements?” can be found here.
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