Companies Reduce Associate Mobility: Is it Fair?

Filed in Blog by on October 23, 2017
Companies Reduce Associate Mobility: Is it Fair?

I devour news articles relating to business and customer service – part of my job – and rarely am totally surprised.  But, last week in the New York Times, when I read Why Aren’t Paychecks Growing? A Burger-Joint Clause Offers a Clue, I was outraged and disappointed to learn that if you get a job in a fast food restaurant, there are clauses in franchise contracts that prohibit you from both lateral and advancement with another fast food chain location.  Unethical and unfair!

These clauses that prevent low wage and hardworking earners job any kind of mobility are not part of the employees’ work agreement. They are included in the contract that the franchisor has with their franchisees. And it’s not only in the restaurant industry. These clauses are found in franchise contracts with companies like Curves, Anytime Fitness and Jiffy Lube.  To clarify, a Pizza Hut franchise owner cannot hire an associate who works for a different franchise owner unless given written permission.

According to the article, Professor Alan B. Krueger, an economist at Princeton University and former chairman of the Council of Economic Advisors, reviewed the policies of 40 franchise companies and found that 32 imposed some kind of hiring restriction. McDonald’s recently notified owners it would no longer enforce the rule.

As the article points out, many organizations have non-compete clauses preventing one employee going to competitor and sharing trade secrets. That is standard operating procedure between an employer and employee. However, it is doubtful associates at fast-food restaurants are privy to strategic plans. Those workers have only have one intent – to provide for themselves and their families.

I wrote a blog a few years ago about another article, Paying Employees to Stay, Not to Go. Its focus was that a number of fast-food chains are discovering the advantages of offering employees better wages resulting in less turn over. The article addressed the subject of the minimum wage and how certain restaurants like Shack Shack, owned by well-known and highly respected restaurateur, Danny Meyer, are willing to pay more to retain associates. People like Mr. Meyer understand that there is a relationship between satisfied associates and happy customers.

The current article concludes that non-compete clauses and franchise agreements might explain the U.S. job market.  Unemployment has reached a 16-year low and job openings are at an all-time high, yet wage growth has remained surprisingly sluggish.

Most employees at fast-food restaurants probably have no idea that they are prohibited from seeking advancement at another location, regardless of their skill level, because there is a prohibition written in the franchise contracts.  Reducing the mobility of low wage earners doesn’t make sense. I think the mission of any good boss is to train your staff to succeed and appreciate and value their good work. Many associates who are in low paying positions are great at delivering service, conscientious and want to better the lives of their families. I don’t think they should be subject to restrictions.

What do you think?

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