Illinois has led in banning employer ‘no-poaching’ pacts

Bill Knight column for Thurs., Fri. or Sat., Aug. 16, 17 or 18, 2018

Employer deals for years have kept workers from leaving one company to work for another in hopes of achieving better pay and advancement. But states are starting to crack down on the practice – Illinois has been a leader in the effort – and now Congress is paying attention.

Last month, Washington state Attorney General Bob Ferguson announced that he’d secured agreements with seven fast-food chains, including McDonald’s and Arby’s, not to use “no-poach” agreements. Elsewhere, 10 states and the District of Columbia are stepping up their investigations into such agreements, as attorneys general from those areas said they’d sent letters to Burger King, Domino’s and other fast-food companies, seeking information about whether those companies use “no-poaching” pacts.

In such arrangements, franchisees promise to not hire applicants who are current or recent employees of the company or any of its franchisees, without the approval of previous employers.

About 80 percent of fast-food businesses have such covenants, as do many temp agencies and other businesses, according to a 2017 study by Princeton economists Alan Krueger and Orley Ashenfelter.

In Illinois, the legislature over the last several years has addressed similar abuses.

The consequences for everyday workers are serious, wrote Terri Gerstein and Sharon Block of Harvard’s Labor and Worklife Program.

“If workers can’t leave their jobs to get a better position that they’re qualified for, their bargaining power is diminished,” they said in the New York Times. “This situation, along with the decline of unions and other trends, helps explain why wages have not kept up with the greatly increased productivity of the last few decades.”

Further, such agreements may already break laws.

“These agreements may well be illegal under antitrust laws, which protect not only a competitive market in products but also a competitive labor market,” Gerstein and Block said.

In Illinois, the “Broadcast Industry Free Market Act” was introduced Feb. 21, 2001, sponsored by Chicago Republican Sen. Walter Dudycz. It passed the Senate that March by a 46-8 vote and passed the House that April 110-3, but then-Gov. George Ryan vetoed the measure that July.

However, the Senate overrode the veto 48-10 that November, followed by the House 94-22 override two weeks later. It was approved that December and became law Feb. 1, 2002.

That law provides that “no television, radio, or cable station may require any employee or prospective employee, other than one in sales or management, to agree as a condition of an employment contract to refrain from obtaining employment in a specific geographic area for a specific period of time after termination of employment with the hiring broadcasting industry employer.”

Likewise, the “Illinois Freedom to Work Act,” whose chief sponsor was Sen. Patricia Van Pelt (D-Chicago), went into effect Jan. 1, 2017, prohibiting non-compete covenants for low-wage workers.

It passed both houses of the General Assembly unanimously in May 2016, and Gov. Bruce Rauner signed it Aug. 19, 2016.

That law “provides that no employer shall enter into a covenant not to compete with any low-wage employee of the employer …”

As to the “Broadcast Industry Free Market Act,” Peoria disc jockey Gary Olson testified after having tried to fight a restriction barring him from performing at a competing station any “services which are the same or of similar kind or are of similar or greater responsibility as those he performed,” according to the 1998 lawsuit involving Midwest Television, then-owner of KZ-93, WMBD-AM, and WMBD-TV.

“He wanted to leave an oldies format station and become the main disc jockey for a soft jazz station,” wrote Marlo Brawer in the Oklahoma City University Law Review. “Even though the [radio] formats would attract different listeners, the court in Illinois didn’t see the restriction as too broad, [so] the court issued an injunction to keep him off-air, which Olson believes ruined his career.”

“A year is a long time,” Olson said in 2001. “When I finally got on the air, some people said they remembered me but they didn’t come flocking to listen to me. They didn’t know me anymore.”

Contacted this summer, Olson remembered when he testified in Springfield.

“The Illinois Broadcasters Association [employer group] did not want to talk about the non-competes with Dudycz,” Olson said. “It kind of [ticked] him off and he just said he would write a new law or get the old one thrown out, and that is when they asked me to testify.”

Meanwhile, progressives in Congress have introduced bills to clarify such agreements are illegal.

Democratic Sens. Cory Booker of New Jersey and Elizabeth Warren of Massachusetts, plus Congressman Keith Ellison (DFL-Minn.) introduced legislation this year to prohibit “no-poaching” agreements, give the Federal Trade Commission enforcement powers, and make it easier for workers to sue.