As a franchisee, one document dictates how your business will be run – your franchise agreement. This contract between you and your franchisor covers things like operations, employees, training, ongoing fees, and advertising and marketing. It’s critical that you understand all the provisions in your agreement. For example, no-poach provisions are common in franchise agreements, but do you recognize them and realize how they work?
What are no-poach provisions?
Franchisees and franchisors make many agreements about each party’s rights and obligations as they finalize their deal. No-poach provisions restrict franchisees from poaching – or hiring away – the franchisor’s employees or people working at other franchise locations.
We should note that no-poach provisions are not the same as non-compete agreements. This contract is between an employee and an employer where the employee promises not to compete against the employer. A no-poach provision involves the franchisor and franchisee.
Other than the obvious, what’s the purpose of this type of agreement?
Sometimes the parties feel that no-poach provisions foster a non-competitive environment between franchisees. Under this type of agreement, one franchise cannot recognize the worth of an employee, poach the employee. This type of action could weaken the franchise that loses the competition, especially if key employees are being lured away.
These agreements could prevent bad blood between franchisees. They won’t be able to indulge in any competitive desire to be better than another franchisee, at least as far as employees go. Franchise locations might remain relatively stable because employees are not constantly moving from one location to the next.
Are there any problems with no-poach provisions?
Some people feel that this type of agreement drives employee salaries down. Employees might also feel they are caught in the middle between their boss and the franchisor. Also, workers might have a real need to move to another location but find they are stuck where they are or that they have to find a new job.
Over the past several years, employees who missed out on better jobs because of no-poach agreements have sued their employers. In 2017, a McDonald’s employee sued, alleging that she had lost a promotion because of a no-poach provision. Also, attorney generals in several states and the federal government have started investigating and, in some cases, prosecuting no-poach provisions under anti-trust laws.
Call to Learn More About Franchise Agreements and No-Poach Provisions
As always, make sure you review agreements and contracts with your business lawyer or corporate counsel before signing.
Attorney Richard Sierra at the Florida Small Business Center assists clients like you with business and litigation matters. As always, Our Goal Is to Help You Succeed™. For an appointment, you may call us at 1-866-842-5202 or use the contact form on our website. We represent clients throughout the State of Florida, including Coral Springs, Coconut Creek, Boca Raton, Delray Beach, Pompano Beach, Sunrise, Fort Lauderdale, Miami, West Palm Beach, Jupiter, Deerfield Beach, Stuart, Port St. Lucie, Orlando, Naples, Fort Myers, Sarasota, Tampa, and surrounding communities.