Laws restricting the use of non-compete clauses could have an impact on the operation of fast-food franchises, according to an attorney with expertise in the field.
Several states including Illinois have enacted legislation restricting employers from including a non-compete clauses in any contract, largely to combat their use against low-wage employees, particularly among fast food outlets. Natalma McKnew, a partner at Fox Rothschild in Greenville, South Carolina, says the concern among some franchisors is that franchisees will be able to avoid signing any non-compete agreements.
Most recently, Maryland enacted legislation to join a growing list of states with laws that restrict non-competition agreements for low-wage employees. The use of these non-competes are widespread in the fast-food industry, according to multiple news reports.
Natalma McKnew, partner at Fox Rothschild in Greenville, South Carolina
Certain states appear to be attacking non-competes in franchises and that is problematic, McKnew told the Cook County Record, adding that they serve a purpose if a franchisor has invested heavily in training the franchisee, including food preparation, customer interaction and other elements key to running the business.
"I see the value when you have a highly trained employee, though with a minimum-wage worker who is not highly skilled, there is a very legitimate question whether those employees should be forced to sign non-competes," McKnew said.
The attorney noted that the law surrounding non-competes is largely a matter of the individual states' legislation, with California thus far moving the most aggressively to bar their use, and more than a few others following suit. On a federal level, the proposed Workforce Mobility Act was reintroduced in the U.S. House of Representatives in October seeking a nationwide standard for non-competes based on California legislation, which bars non-competes except when it involves business sales or partnership dissolution.
McKnew also says that if a worker has key proprietary information, there are other state and federal laws protecting trade secrets that can be used in the absence of non-compete clauses.