Businesses in New York may soon no longer be allowed to enter into so-called “no-poaching” agreements that prevent their workers from being recruited by other franchises within the same company during their employment.

State lawmakers in Albany are moving on legislation that would outlaw those agreements, which research has suggested limit the ability of individuals to seek better pay and advance their careers.

The legislation is geared toward preventing those contracts primarily among franchises, where they are often used to block employees from moving between different locations within the same company, thereby reducing turnover. It's sponsored by State Sen. Brad Hoylman, D-Manhattan, and Assemblyman Jeffrey Dinowitz, D-Bronx.

The bill moved for the first time this week when the State Senate Judiciary Committee voted to send it to another committee before it comes to the floor for a vote. Hoylman, who chairs the Judiciary Committee, said he expects it to pass the Senate before they leave for the year in June.

“I think we can move it,” Hoylman said. “I'm hopeful.”

It's expected to gain traction in the Assembly as well in the coming weeks after lawmakers return to Albany from a two-week break, according to Dinowitz. The legislation is currently in the chamber's Codes Committee, but Dinowitz said he expects it to move and come to the floor for a vote sometime after they come back from break. Lawmakers are scheduled to return to Albany on April 29.

“It's a very pro-consumer, pro-worker piece of legislation and I fully expect us to pass it,” Dinowitz said. “I can't guarantee anything until it happens but I expect us to pass it.”

The bill was inspired by research on the issue that found more than half of franchisors in the country included so-called “no-poaching” agreements in their contracts with franchisees, whose employees are then prevented from seeking employment at a different location in the same company.

A study from the IZA Institute of Labor Economics in Germany and late Obama-era economist Alan Krueger found that 58 percent of the chains they looked at included agreements in their franchise contracts that restrict the recruitment and hiring of workers by other units affiliated with the franchisor. The study concluded that those agreements may reduce the job opportunities of those workers, who would be prohibited from, for example, seeking work at another location for better pay.

“It's apparently widespread and what it does at the end of the day, that arrangement restricts individual employees from moving,” Hoylman said. “Let's say they've developed an expertise at one Jiffy Lube—they're restricted from working at another Jiffy Lube maybe for a better wage.”

That point is covered in a report released earlier this year from the Center for American Progress, a left-leaning economic research organization. The report said those agreements have contributed to slow wage growth in the U.S. by preventing employees from seeking opportunities with better pay.

The bill from Hoylman and Dinowitz is relatively straightforward in attempting to curb those agreements. It would block any agreement between two or more employers, including through a franchise agreement or a contractor-subcontractor agreement, that prohibits or restricts one of those employers from soliciting or hiring another employer's employees or former employees.

It would also create a private right to action on the issue, which would allow any individual who was denied employment because of one of those agreements to sue for damages, punitive damages as the court would allow, and attorney's fees. The state attorney general would also have jurisdiction to bring such a lawsuit against companies who enter into those agreements.

While the legislation was being considered in the Senate Judiciary Committee, lawmakers repeatedly referred to fast food chains, like Burger King, as an example of companies that require their franchisees to enter into the agreements. Dinowitz said the reach of the legislation would go far beyond fast food chains, really including any company that has multiple locations and attempts to require a so-called “no-poaching” agreement.

“It's not just fast food, obviously, there are many different types of people this would affect,” Dinowitz said.

The legislation would take effect immediately after it becomes law and would make any of those agreements currently on the books null and void, Hoylman said. Lawmakers will have eight weeks when they return to Albany to consider the bill before they end this year's legislative session in June.

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