Why Are Fast Food Workers Signing Noncompetes? | Hacker News Reader

Why Are Fast Food Workers Signing Noncompetes?

nytimes.com

139 pointsjseliger83 comments

The FA says this is the kind of non-compete that your server at Burger King might have to sign:

"The contracts prohibit employees who quit from taking a job at a competitor for a period ranging from months to years."

This is definitely intended to keep chain-A employees from defecting to chain-B for better working conditions.

The final tool in a person's toolbelt for labor negotiations is the resignation. This type of agreement is intended more to prevent resignations than to prevent leaks of valuable business strategy or similar.

These non-competes are 100% illegal and unenforceable. The NLRB would back the employees in a heartbeat and companies are just using it as a scare tactic cause they know they can't defend it.

They are absolutely enforceable.

A court might not enforce them, because, depending on your state, they may be of questionable validity.

But people who don't know that will believe they are enforced.

People who aren't willing to risk going to court will have to act as if they are enforced.

People who can't afford to go to court will have to act like they are enforced.

*Additionally, I have seen these contracts enforced outside the court system as well.*

I had a friend who was fired from a job he went to, because his former employer called his future employer, and threatened a lawsuit / threatened to drop mutual business because the future employer helped the employee break the non-compete agreement.

The past employer may not have had any case (except for the lost business), but the future employer didn't want to deal with legal trouble, and it was easier to just find a reason to fire the employee.

How sure are you that you won't be fired at your new job, because a conversation like that took place behind closed doors?

How sure are you that McDonalds would be willing to foot a legal bill to defend their new minimum wage employee, if Burger King threatened legal action?

Non-compete abuse needs legal reform.

By this logic, anything is enforceable because some people will think it's enforceable. Your point is a valid one, but it's also good to tell everyone that these contracts are not legally enforceable!

If in practice a company can sue you and force you to pay legal fees until you are deep in debt (and you are not sure about winning), they are correct. Even if it's illegal, even if you would probably win.

Edit: What I'm trying to say is these contract should not just be illegal, the corporations using them should be fined into the ground retroactively for ever having had people sign them knowing (because they definitely know) that it is illegal. It's a willfully malicious action.

It would be even better if Federal and State governments told employees they were unenforceable, and better still if they did this after passing explicit legislation to ban the practice entirely (with civil penalties for employers who disregarded the law.)

Can you find a case of where they've successfully sued someone for this?

The point is they don't have to be successful to have teeth. A fast food worker probably can't afford a single day in court.

They can’t afford the lawyer consultation fees prior to court

Absolutely. The Wikipedia article is full of them. What's critically important to know is the rules where you live because they're different depending on jurisdiction. If you are in California, non-competes are invalid. (Silicon Valley was built upon the Traitorous Eight.) If you are in Massachusetts, non-competes are valid (and you better hope you don't need a new job in biotech any time soon).

Talk to your lawyer for advice.

In the US, it depends on what state you’re in.

In California, for example, non-competes are illegal. So, companies sign or verbally negotiate mutual non-poaching agreements, like Apple and Google did a while back.

In other states, nothing prevents non-competes, and if an employer can get you to sign the paper, then that is enforceable against you with legal action. You can hope that the National Labor Review Board would be on your side and help defend you against such legal action, but there’s no guarantee that they would do so.

IMO, non-competes should be reserved for situations where you’re touching deep secrets within the company, and then only for short periods of time. Like CxO or Director type company officers, or Principal Software Developers or something like that. No one else should be subject to them.

> In California, for example, non-competes are illegal.

Illegal or just non enforceable? What is the fine or punishment to a company that would do it anyway?

Hmm. Yes, you are most likely correct.

I should have used the term “non enforceable”.

Thanks for the correction!

If your friend was in a fast food type job it sounds like he would have a good lawsuit in most places. Can’t imagine any business interest the court would recognize there. Yes its terrible that big companies bully workers like this but it only stops when someone stands up and fights them.

On too many occasions, when filling out those forms online that have become ubiquitous when applying for jobs, I have had to answer a question asking whether I am under any sort of non-compete agreement. I imagine if I choose yes, my resume will be sent directly to the trash folder on the applicant tracking system. The nuances about which clauses of the non-compete may not be enforceable won't matter.

If I lie, I imagine it will only take one phone call from the previous employer for the new one to fire me. If you tell the truth, I don't get the job in the first place. If I want to invalidate it through courts, well I don't have more than 10 million dollars in the bank, and we all know even single digit millionaires have no effective access to the legal system.

I am not a minimum wage worker or in the US, but I am sure people applying for minimum wage jobs in the US see similar questions and have to fill out similar forms.

You might try looking for poor people (which is anyone who's not a millionaire, by parent comment's definition) who have managed to get effective access to the legal system. I'm sure there are millionaires that don't, but that's not a money issue and there's something else going on.

The cost of enforcing your rights is usually beyond the means of someone working a minimum wage job.

It's not illegal by any means, it's ability to be enforced is questionable though given precedent. Look at any tech firm with CEOs whom used to be with their firm's competitor;

That's a large chunk of chief legal officer work, getting new hires out of the non-competes by proving the contract was not enforcable in the eyes of an average reasonable person in that locale.

But...FF employees won't have a dedicated lawyer, unless there's some frivolous class action that doesn't truly represent the employees.

I think, we'd all be surprised to find that many "illicit" things aren't illegal at all, but rather would get struck down in a civil court if sufficiently challenged, and that much of our economy is driven by that.

They're not legal in CA

The McDonalds employees are not likely to know this. The contract itself is abusive, and its unenforceability is not a defense.

Is McDonalds really suing min wage workers who leave for Wendy's to get a better schedule or 25 cents more per hour? I get that they could but I can't see how that's ever a reasonable business decision.

They most likely aren’t. But putting that in the contract can make workers think they can’t take that Wendy’s job. I cannot think of two entities with a bigger power gulf than McDonalds and a McDonalds worker, so the expectations must be calibrated accordingly.

Now I wonder what sort of judgement they could even get? Worker has to come back? Worker has to pay some fraction of the perceived losses of that restaurant? Worker has to pay some fraction of their wages?

And then would this even pass through the system?

I think the most likely judgement would be that the worker has to quit their job at the competing business.

If the employee were compelled to quit, unemployment couldn't go after the worker for the lost job, so they would want to go after McDonald's for 2.5 years of unemployment instead of .5 years for every worker they break.

Making examples of a few is a more efficient option than suing everyone. But this is insanity, and should be legislated against.

According to the Chamber of Commerce, "They are contracts freely bargained for before or during a period of employment. The employee gains something valuable in exchange for the voluntary commitment."

Back in my brief employment in the fast food business, I gained something valuable: minimum wage. Are today's milkshake makers and pizza schleppers earning something more valuable?

"Where concerns go beyond antitrust, the chamber says, they should be judged by courts under contract law or “left to state legislatures.”

In military terms this is called "defeat them in detail," I believe.

Ah, the idea that "contracts freely bargained" are fair. Sure, most people do think that working 10 hours in exchange for minimal wage is a better proposition than starving under open sky at full leisure, so such employments are (mutually) beneficial market transactions. They are. But the question is not if they're mutually beneficial, the question is are they fair?

There is quite some gap between the minimal wage that's enough for subsistence and the maximal wage that still won't ruin the business, so the actual wages land anywhere in the middle as a result of those conflicting constraints.

>There is quite some gap between the minimal wage that's enough for subsistence and the maximal wage that still won't ruin the business, so the actual wages land anywhere in the middle as a result of those conflicting constraints.

Source? My impression is that fast food restaurants run on thin margins.

If they can afford a CEO that makes millions, the fact that they don't make a ton of profit (this is rhetorical: They definitely do) is immaterial: The margins could be thinner, the workers could be better paid.

Maybe the rents are too high and both the owners and workers are being squeezed by a housing and healthcare cost crunch, driving thousands of businesses out of the profitable range.

One of my friends likes to recall an experience from about a decade ago: he was working at a small firm and once went to the boss/owner to ask for a raise. The boss explained that right now the times are tough, there is no spare money in the business so he can't do anything but he'll keep his request in mind. Okay, but literally next week the boss drives to the job in a new (luxury) car. When my friend, after congratulating him with the purchase, asked about the money situation he was told to not count other people's money. The friend left the firm a couple of months later, without getting any raise during that time.

Sure, "the goal and purpose of any business to exist is only so that its owner can buy himself a new Ferrari" but... some workers tend to disagree, especially when they feel that they're doing the bulk of the actual of work without a correspondingly large compensation for it.

McDonalds had a gross profit of ~10B and net income of ~6B in 2018.

Maybe we have different ideas of thin margins.

1. what's their revenue? Walmart has 13 billion in net income. That might sound like a lot, until you realize that they make 559 billion in revenue, which works out to a relatively thin margin of 2.4%.

2. not an accountant, but the fact that mcdonalds licenses their brand to franchisees probably messes with their profitability figures. They might be making 50% margin on franchise fees, but that doesn't mean the actual restaurant has 50% spare cash to spend on employees.

Revenue was ~21B, =~ 28% margin.

I'm also not an accountant so I'm not about to speculate on the rest. Maybe your right and it's a factor.

That's at the corporate level though. They are largely making their money from selling food or renting space to franchisees. The individual store's margins (the ones paying the actual burger flippers) would be quite a bit lower I assume.

Assuming franchisees make less margin (which I guess is fair to assume): What does that matter?

If the parent company took less margin overall and distributed that ver each franchisee they could pay more.

According to a quick Google there are a bit more than 38000 McD restaurants in the world. So still around 500k. I'm not sure what number of people an average McD employs as I'm reading numbers that differ wildly.

>>something more valuable?

yes? I am not aware of any fast food chain paying minimum wage (at least not the federal min wage in the US)

In my area most are about 2x Minimum Wage being advertised, with interview and signon bonuses

And I am glad that the chains are paying more. But is the extra 1x minimum wage worth the noncompete?

I don’t think they need to be outright banned but for the duration of the non compete the employer should have to keep paying the salary. They can then keep workers from joining a competitor if it is important to them. But the cost associated will prohibit its use as a scare tactic.

That's how it works in many European countries. I once had a job with a boilerplate non-compete, the clause made it clear how much they would pay me if they chose to enforce it. When I quit, they immediately informed me they were not enforcing/paying for it.

> many European countries

Not two of the most wealthy ones I know, so I must ask: Which ones?

It's the case in France.

This is common in the financial industry: https://www.investopedia.com/terms/g/gardening-leave.asp

> for the duration of the non compete the employer should have to keep paying the salary.

How does that interact with many people needing to get a new job to get a raise?

You'd have to go work a retail job instead of fast food but McD's would still be on the hook for your original pay.

How is what you're describing (paying someone a salary to provide value to the company) different from "employment"?

I think the implication is that salary is paid regardless of employment, as long as the non compete is enforced.

So if I quit McDonald’s they have to either keep paying me or release me from the non-compete and allow me to work at Burger King.

I think it’s totally fair.

It is employment with severe restrictions on job requirements, while not paying someone for providing years of service is indentured servitude.

"Garden leave" is when an employer keeps you on payroll so you can't start at a competitor until your strategic knowledge becomes stale. CA Courts require consideration be provided in exchange for not being able to earn a living.

Right, but is this person unemployed or not?

Alternatively, they could only be allowed for highly paid jobs, say, 10x minimum wage and more.

That sounds like a really powerful way to put downward pressure on the minimum wage.

An interesting retort. I did not think about this scenario.

Wages are notoriously sticky, but there could be pressure to keep the minimum wage stay put in periods of great inflation. Such as the one that we might face soon. Possibly, we are already in.

Maybe the limit could be derived from the median wage. Such as "only jobs that earn 4x or more median wage can be subject to noncompetes".

Counterpoint: noncompetes should not be allowed at all. Employers shouldn't be able to control the livelihoods of people who don't work for them. If they fear theft of trade secrets, there are already laws in place for that.

I think it’s fine in finance, noncompete terms are pretty generous and there’s a real case for IP sensitivity with trading strategies and alphas

I think it's OK for highly compensated employees and employers to have these agreements, as long as the power balance is relatively equitable in the beginning. It allows a certain level of employer investment with assurances that those investments wont immediately be used to boost their competitors and presumably the employee is able to extract some concessions from the employer for signing it. In cases where it's literally just a soulless corporate chain bullying employees into being serfs it's completely immoral.

> as long as the power balance is relatively equitable in the beginning

That's a big 'if'

Naive question, but I wonder if non-competes have been tested in the supreme court if they violate the constitution. Seems like the very concept is an infringement on personal liberty and if extended too far comes a bit too close to indentured servitude, especially in this era of specialization where your livelihood is heavily tied to your profession.

Edit: Also, NDAs exist for IP and confidentiality, so why non-competes ?

From one law class I took the way it was explained is this.

The original purpose of non-competes was for people like C-Suite executives, and sales people. The point being that you don't want sales people walking out the door and taking a whole client list with them etc. This makes sense because you want to protect things like IP, strategy etc. The theory goes that companies wouldn't want to build up long term strategies or technologies if those people can just walk out the door and bring those things with them. It's also unfair to the company that a salesperson can walk out the door with a client list.

For your standard employee it shouldn't be used, but in 2008 when the recession happened companies got away with it and now it's standard even if they're unenforceable. They get "blue penned" a lot, where the terms of the non-compete get changed in court. IANAL but non-competes have been around forever and I doubt they would violate things like the 13th amendment or something like that.

Tbh I think the best of both worlds would be that you force companies to do the thing Wall Street Traders get. If you want to sign a non-compete the company has to pay out the employee's salary for X amount of years the company wants them off the market. Provides a nice balance where the company can't just non-compete everyone b/c now they have skin in the game.

> From one law class I took the way it was explained is this

> The original purpose of non-competes was for people like C-Suite executives, and sales people

It wasn't; the original purpose of noncompetes was for lower-rank guildsmen employed by guildmasters; we know this because there are British cases adjudicating them back to at least the early 15th Century and statutes restricting them back to at least the mid 16th.

So, take any explanation that starts with the “C-suite and salespeople” origin story as suspect.

Its interesting because I am guessing that this might be done today as educational debt. There were probably laws against debt back in the 15th century which prohibited this solution.

In Austria, you have to earn at least 3700€ (before taxes) to have noncompetes.

https://www.wko.at/service/arbeitsrecht-sozialrecht/Konkurre...

I've never heard of a fast food worker signing a noncompete agreement, and the only evidence that the author provides is that 12% of workers earning under 20k annually are under some form of noncompete without any context or breakdown by industry sector.

Noncompete clauses are awful imo, but the framing seems disingenuous.

From a few years back, but here's an example: https://www.cnbc.com/2016/06/22/jimmy-johns-drops-non-compet...

This is absolutely a thing. I suspect your experience with fast food work might not be very extensive.

If it's true, they're probably doing it out of desperation. Or perhaps just the knowledge that no judge anywhere in the western world would actually uphold a non-compete clause in a fast-food worker's employment contact.

They're just hoping they can scare the inexperienced person by telling them that they signed a non-compete, so they can't just leave and go across the street. They're not going to take it to court. They just hope the employee doesn't know better.

Yes my thoughts exactly. It's completely uneforcable. IIRC non-competes are only legal if you literally cannot just hire anybody off the street. The simple fact that restaurants near me are moving over from english to spanish speaking staff is evidence that you don't even need to speak the native language to get the job.

"Typically low-wage workers aren't privy to trade secrets"

Hey now, the "Secret Sauce" is super secret and deserving of extensive protections!

It comes off the truck in a bag. Heat it. Squirt it. Serve.

>Heat it. Squirt it. Serve

Hey, that highly technical process is valuable Intellectual Property owned by the McDonald's corporation, careful they don't come after you!

Some states ban pay day loans. Talk to your state reps and ask them to ban non-competes and fine companies which attempt to do business in the state but block the state from hiring.

I really think the easy solution (if there's such a thing) is that non-competes should be paid at 200% of the person's previous full time adjusted comp. If a company really wants to bench someone, they can, but it puts a pretty high bar for who they do it to.

archive: https://archive.is/d4pnt

https://web.archive.org/web/20210929201944/https://www.nytim...

TFA is paywalled, but if this is actually practiced, this is awful and immoral on so many levels - treating minimum-wage employees like this isn’t good for anyone. Imagine a young single mother being trapped by, say, McDonalds and is unable to get another similar job for any reason (schedule, working conditions, location, etc.), even if she is fired. How is this not basically underhanded institutional slavery?

This really smacks of big powerful companies taking advantage of and beating up the little people. I mean, c’mon, these people are flipping burgers, not key personnel in a multimillion dollar contract.

If I had the time and energy, I’d organize a social media campaign and boycott any of these joints that dare to implement such unethical tactics.

Fortunately this is not a thing in California

Because they don't have a choice?

I thought non-competes could only be enforceable if the purpose of it was to prevent poaching and your knowledge of the company is vital to it's ability to compete, but on a high level (like you're a partner or established something significant). You can't say "we own you, you can't go elsewhere to do general labor."

As consultant I have non-compete for same customer and same project. It seems reasonable to me. My company sells my work to someone, and someone else can't skim the profits from that process. Still, I'm entirely free to work with someone else with someone else.

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