Non-compete clauses, and the lesser-known no-poach agreements between franchises, are shockingly common for low-wage workers. Although these contracts were originally intended to protect trade secrets among high-level executives, they have spiraled into an unfair labor practice that keeps wages low, limits employee mobility, and decreases competition. Washington state Attorney General Bob Ferguson explains how non-competes and no-poach agreements violate the law in many states, what his team did to get hundreds of huge employers across the country to cease and desist, and why you should tell your state’s Attorney General if you know of any low- or middle-income workers who are being forced into signing these agreements.
This episode was originally recorded and released in May 2021.
Bob Ferguson is Washington State’s 18th Attorney General. As the state’s chief legal officer, Bob is committed to protecting the people of Washington against powerful interests that don’t play by the rules.
Twitter: @BobFergusonAG
Noncompete agreements have pushed U.S. wages even lower, says
a new Biden administration report: https://www.fastcompany.com/90729820/noncompete-agreements-have-pushed-u-s-wages-even-lower-says-a-new-biden-administration-report
Why aren’t paychecks growing? A burger-joint clause offers a clue: https://www.nytimes.com/2017/09/27/business/pay-growth-fast-food-hiring.html
Workers in Washington state win big under new non-compete law: https://www.emeryreddy.com/2019/09/workers-in-washington-state-win-big-under-new-non-compete-law/
Attorney General Bob Ferguson stops King County coffee shop’s practice requiring baristas to sign unfair non-compete agreements: https://www.atg.wa.gov/news/news-releases/attorney-general-bob-ferguson-stops-king-county-coffee-shop-s-practice-requiring
AG Report: Ferguson’s initiative ends no-poach practices nationally at 237 corporate franchise chains: https://www.atg.wa.gov/news/news-releases/ag-report-ferguson-s-initiative-ends-no-poach-practices-nationally-237-corporate
Website: https://pitchforkeconomics.com/
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Goldy:
About a year ago we were joined by Washington State Attorney General Bob Ferguson for a conversation about the insidious corporate practice of instituting noncompete agreements on low-wage workers. Although AG Ferguson has led the charge to make many of those agreements illegal now, they still prevail in many areas of the country. Just this month, a new study done by the U.S. Treasury Department found that anticompetitive behavior, including noncompetes, decreases wages by 20% — and sometimes more. If you know someone who institutes noncompetes on their low-wage employees you should shame them ruthlessly, if you know a low-wage employee who is subject to a noncompete you should urge them to contact their state attorney general, and this episode will explain exactly why.
Bob Ferguson:
There are a lot of myths around non-competes, people think, well, there’s not that many. And it must be these executives who have all top secret information about a company and should not go to a competitor. The reality is very different. 30 million people, nearly one out of every five workers in the United States are currently bound by non-competes.
Nick Hanauer:
It’s just been this fantastic way for companies to steal power, to steal wages from their employees.
Speaker 3:
From the home offices of Civic Ventures in downtown Seattle, this is Pitchfork Economics with Nick Hanauer, the best place to get the truth about who gets what and why.
Nick Hanauer:
I’m Nick Hanauer, founder of Civic Ventures.
David Goldstein:
I’m David Goldstein, Senior Fellow at Civic Ventures. So Nick, I can’t really describe what it is I do for you, but if I wanted to do this for another really rich guy, I’m perfectly free to do that, right?
Nick Hanauer:
You are at any moment, at any time.
David Goldstein:
Because you never had me sign some non-compete or anything saying.
Nick Hanauer:
That’s right.
David Goldstein:
That I can’t do this thing, that I can’t describe for somebody else who I can’t describe.
Nick Hanauer:
Yeah, you can go torture someone else anytime you choose. And it will be fine.
David Goldstein:
And yet, Nick, for millions of low wage workers, workers earning under $20,000 a year, they have been forced to sign non-competes to keep them from working for other companies, particularly it was predominant in the fast food industry and the restaurant industry and other low wage sectors. Absolutely stunning.
Nick Hanauer:
For those listeners who are not familiar with this practice, a standard non-compete is one and a half to two years. And the company requires you to sign it upon accepting employment. And it basically prohibits you from doing work similar to the work that you are presently doing for any other competitor for a year and a half or two years. And obviously, this is great for the company that forces you to sign the non-compete, but it’s terrible for you because God forbid, you get an offer for a 25% increase in salary from another company or a company headquartered in a place which is more convenient for you or a promotion with another company that will further your career. All of those things are off the table if you have signed one of these non-competes. And so it massively decreases the power of the individual worker to improve their circumstances and massively increases the power of the employer, which is what much of modern corporate America would prefer.
David Goldstein:
And this was not always the case. I used to be that most workers didn’t sign employment contracts at all. Only folks at the very top did. And it’s something that developed over the last few decades during the neoliberal era. And these non-compete agreements, the explosion of non-compete agreements, particularly in the service sector, absolutely have played a role in suppressing wages over the past 40 years because they have dramatically diminished the power of employees to look for work elsewhere and to negotiate for higher wages.
Nick Hanauer:
That’s right. And in this episode, we’re not just going to talk about non-competes, which is something that companies force workers to sign, but in equally pernicious practice that has been largely invisible to most people, which are the no-poach agreements that many of the largest companies and largest franchise operations have in place, which precludes one McDonald’s franchise or one Burger King franchise from hiring a worker from another Burger King franchise. God forbid, that person would like to move closer to their home or get a promotion or a raise. All of that has until recently been precluded by these internal agreements. It wasn’t until relatively recently that I learned that this practice now permeates the business culture, that every kind of company is forcing people to sign non-competes, no matter how junior the employee is and how little money they pay. No matter how ridiculous the idea is, it’s just been this fantastic way for companies to steal power, to steal agency, to steal, frankly, wages from their employees, by intimidating people with these agreements.
And today, I mean, I’m super excited that we get to talk to our good friend, Washington State Attorney General, Bob Ferguson, about his work in limiting those no-poach agreements, not just in Washington State, but around the country, because if those no-poach agreements sound like illegal collusion, they are, they’re illegal. Anyway, with that, let’s get to our conversation with Bob Ferguson, who is not just Washington State’s amazing attorney general, but was voted by Time Magazine as one of the 100 most influential people in the world, because Bob basically sued the Trump administration for everything nonstop.
David Goldstein:
And it was like 39 in one.
Nick Hanauer:
That’s right. Just absolutely. For listeners outside of Washington State, we are extraordinarily fortunate to have this guy as our attorney general. He is an amazing and tireless worker on behalf of the people and just a great guy, good friends. So Goldy, let’s talk to Bob.
Bob Ferguson:
So I’m Bob Ferguson, and I’m the Attorney General for the State of Washington and been in that job for about nine years now.
Nick Hanauer:
Bob, today, we get to talk about something incredibly important and near and dear to my heart and very near and dear to your heart, which is the practice of non-competes and other anti-competitive corporate behavior. They are an incredibly pernicious practice if they apply to people other than senior executives. And you’ve taken a huge step here in Washington State and around the country to deal with this. So tell us a little bit about what you’ve been up to.
Bob Ferguson:
Sure. So a non-compete is between the employee and the employer. There’s a lot of myths around non-competes and also, there’s similar agreements, one’s called a no-poach, which we’ll get to that later on, that’s between a corporate headquarters and franchisees that impact workers. But these are related. But one thing I do want to say about non-competes is I think for a lot of your listeners, I suspect there are a lot of myths around non-competes, specifically, I think people think, well, there’s not that many, and it must be these really super well paid executives who have all these top secret information about a company and should not go to a competitor and share that information.
The reality, as you guys both well know, is very different, about 30 million people, nearly one out of every five workers in the United States are currently bound by non-competes. And that’s according to the Treasury Department, even more or about 40% of all workers at some point in their careers are going to be bound by a non-compete. So this idea of this super high level executive being the folks impacted, no, it transcends all sorts of positions, industries, and even salaries made by individuals.
Nick Hanauer:
I mean, the really pernicious thing that has happened. I mean, I think in the beginning, non-competes were probably not a terrible idea. They applied to the most senior executives, usually in technical industries. And there is some reasonable rationale for requiring somebody who’s in the top, in the executive suite at a large corporation who has a lot of, obviously, their job entails a lot of company secrets to not just learn all that stuff and go across the street and compete, although there’s an equally strong argument to be made that none of this, it shouldn’t apply to anybody either, but certainly, you can get your head around defending that. What happened, of course, is that companies like Jimmy John’s that make sandwiches started to require the people who made sandwiches for $7.25 an hour to also sign those non-competes. So they could not go across the street and make hamburgers or something like that, right?
Bob Ferguson:
Exactly.
David Goldstein:
Or go to Subway and make sandwiches.
Bob Ferguson:
That’s exactly right. In fact, just to put a very specific number on that, I think it’s about 12% of workers who make less than $20,000 a year are covered by non-competes. I mean, that startled. I mean, what trade secret, what trade secret, what top secret information could those workers possibly have? And so you’re right, Nick, that look, one can have a policy conversation around high level CEOs and executives, and whether they should go to a competitor and have that information, but that’s a reasonable conversation. But let’s be honest, the high percentage of workers who make under 60,000 bucks a year, for example, who are covered by these is truly outrageous and has huge impact on our economy and those workers.
Nick Hanauer:
That’s right. It basically is a way of signing away all your power to negotiate to your employer permanently. You basically cannot go, I mean, even the advocates of free markets, I think would acknowledge that if you don’t have the ability to go across the street and work for somebody else, then there is no free market.
David Goldstein:
Right. And if you don’t have that ability, then your employer doesn’t have to worry about losing you to somebody who’s going to pay you much more. So it’s just a way to suppress wages even further.
Bob Ferguson:
What I find incredibly both ironic and offensive about it, of course, is that you can imagine somebody who goes to work for a couple of years in a McDonald’s, and it’s not a low skill job. There’s a lot of skills that you pick up doing it, you learn how to do it better. And now, you can’t use those skills you’ve developed to go to another McDonald’s.
Nick Hanauer:
That’s exactly right. And now, you’re getting into these no-poach agreements, which are, look, as outrageous as non-competes are for many workers, which they are, in that case, at least the worker is aware it exists, right?
Bob Ferguson:
Yes.
Nick Hanauer:
It may be an unequal situation, you may not have any bargaining power, it may have little purpose, but at the bare minimum, at least you know it exists when it comes to the situation you just outlined Goldy, right? A McDonald’s fast food worker who wants to shorten their commute maybe, and go to a close McDonald’s, so they have more time to spend with their family or get better wages or get a promotional opportunity. Those have been covered historically by what we call no-poach agreements, which are slightly different because those are between the corporate headquarters, the McDonald’s, and that local franchise.
So I’m sitting here in Northeast Seattle, my basement and my home and our local McDonald’s, let’s say somebody wants to make a move to a different McDonald’s who’s a worker at McDonald’s, when they go apply for that job at that other McDonald’s, they’re turned down and they don’t realize they’re turned down because that franchise is forced by corporate headquarters to sign this no-poach, not going to poach or take another employee from another McDonald’s. But what the hell is up with that when people talk about a rigged system in our economy? That’s what that is, right? That’s what that is. There is no laws-
David Goldstein:
We used to call that collusion. Didn’t we?
Bob Ferguson:
And frankly, you’re not far off all joking aside, because it became the view of my office when we started looking into this, and there’s a backstory there if you want to get into, we started looking into these no-poach agreements. And when we did, my team came to the conclusion that they actually violated antitrust laws. So to your point, it really is unlawful to restrict a worker’s stability to move from one job to another.
Nick Hanauer:
And one of the great things about living in the State of Washington is all the great work that gets done here by our political and civic leaders, and you did a bunch of really great things to make this better, not just in Washington State, but around the country. So take us through that.
Bob Ferguson:
Sure. So well, we’ve been involved on issues related to workers for as long as I’ve been attorney general. I think it was several years ago now when we literally were sitting around my office, a group of us are sitting around the office, just having a brainstorming conversation about, hey, what more could we be doing in this area about workers? And my solicitor general, guy named Noah Purcell, brilliant guy, said he had just read an article in the New York Times, lengthy article that focused on these no-poach agreements we were just talking about and how these are these huge companies, the McDonald’s, the Burger Kings, you name it, across many industries that require all the franchisees to sign them. And it talked about the economic impact and the personal impact on workers who are limited in terms of their ability to improve their situation.
And so Noah brought this up and I said, “Well, let’s take a look and see if that’s legal or not.” And my team looked at it. And as I mentioned, they came back saying, “No, that’s illegal.” And so what we did, which is actually interesting is, as attorney general, I have the power to request information, essentially, a subpoena from companies, if we have reasonably, they might be violating the law. So we just created a list of every corporation had franchise in Washington State had more than a few and sent them a request saying, give us your agreement with your franchisees. And we went through every single one of them to see if they had a no-poach clause. It’s a huge number, it had nearly 300. Now keep in mind, these are huge corporations in many situations, and this impacted millions and millions of workers across the country.
So what we did was we sent them a letter saying, basically, you need to eliminate this no-poach provision, not just know your Washington franchisees, but nationwide. Otherwise, your option is, we’re going to file a lawsuit against you. And so eventually, over the course of about a year, all of them eliminated these no-poach agreements. And again, not just in Washington, but across the country with just one exception, there was a Jersey Mike’s that resisted. They said, we’re not going to sign it. We’re not going to sign it. We’re not going to sign it. So we sued them. They were the one company we had to sue. And after a little while, they realized that they were going to lose. And so they said, “Okay, we’ll take your deal.” And I said, “Well, you can have the deal, but now you’ve got to pay 150 grand for the trouble we had suing.” So they wrote the check, they signed the same deal everybody else signed.
David Goldstein:
I don’t think their sandwiches are very authentic, New Jersey, but their attitude, certainly, it was.
Bob Ferguson:
It’s really true. I mean, and they were just so like, how outrageous this lawsuit was. And so in the end, they had to pay for the privilege of resisting it. But the good news is this has led other attorneys general, because of course, there are some companies that operated maybe on the East Coast or on the south, and they’re not in Washington State. So our agreements not impact those entities, but other AGs have now done their own investigations in this space. And so really, when it comes to no-poach provisions, just in the last year, thanks in large part to my team doing this work, we just made a dramatic dent to put a mildly on eliminating those no-poach provisions and to the benefit of millions and millions of workers who now have that opportunity to go from the one McDonald’s to another, or the one hotel to another, they can now do that.
David Goldstein:
And Bob, as a practical matter, it’s one thing to take the clause out of the franchise agreement. Do you think it’s changed practice?
Bob Ferguson:
Yes, it has. So we follow up on these things to make sure that has. So in other words, now that, and if you think about it, I mean, there’s no benefit to the franchise who’s forced to sign this thing. If there was a worker they want who happens to work at another McDonald’s, they want that person to come over and work for them if they’ve got that skillset they developed. So it’s not like the franchisees, but frankly, what we heard a lot from those franchisees was, hey, look, I just signed this thing because corporate headquarters sent it to me. I don’t necessarily like, I just don’t have a choice. I don’t have a choice. I want to set up my local franchise McDonald’s here in Washington State, they sent me the form and said, sign on the dotted line. What are they going to do? Negotiate around that? No. So this is one of those situations where actually the franchisees for the most part did not actually have a problem. We had to deal with corporate to get rid of it.
Nick Hanauer:
Interesting. And in the same timeframe, the Washington State Legislature also passed a law that basically prohibited probably a majority of non-competes, correct?
Bob Ferguson:
That’s exactly right. And so our state legislature, to your point earlier that, hey, we’re fortunate in Washington State to have many elected officials who are focused on this issue. And so that law was passed relatively recently, actually. And what it does is, I’m going to oversimplify it a little bit if that’s okay, but essentially, it says, if my memory is correct, that non-competes are essentially forbidden for workers who make less than, I believe it was a $100,000 a year, is where they drew the line on that. And so it’s a really positive step.
And so for your listeners, many states, of course, do not have this effectively a ban on non-competes for workers in that area, hey, talk to your local legislators in your state and hey, if there’s no-poach agreements going on or you hear about, write to your attorney general. Your attorney general has the power to shut those down exactly in the same way that I did. The roadmap is there, the work is done. These corporations will cave if an attorney general writes a letter saying, you need to get rid of this, it’s unlawful.
And so really, your listeners should feel, and I know Nick, you empower people all the time with your work, which I appreciate, people should feel empowered to reach out to their elected official and say, hey, let’s pass this law on non-competes, Washington and others have done it. Let’s get rid of these no-poach agreements, here, they’re impacting workers right here in our state.
David Goldstein:
Is there any opportunity for federal action on this? I mean, obviously, Congress can do. Do you know whether this is something that the Biden administration could address via rulemaking?
Bob Ferguson:
That’s a great question, Goldy. Thanks for asking that, because the answer is yes. And so right now, fortunately, with the change in administration, we have an administration who frankly cares about workers and their future and their opportunities. And so the Biden administration has set a goal, Goldy, of eliminating or substantially narrowing these no-poach and non-compete clauses that have been so prevalent and pervasive throughout our economy. And so they’ve got a plan that says that is their goal, they’ve got it laid out. And so at that level, with this administration, they’re focused on that. In addition, the Federal Trade Commission has also been looking at this issue. Recently, in fact, they hosted a workshop on this issue, more than one commissioner has expressed interest in using the authority that commission has rather than waiting for a federal law.
So I think we’re finally seeing some movement. In addition, my team has gone back and testified back in Congress back in the pre-COVID days around the work we’ve been doing around non-competes in Washington State and no-poach provision. So I would say that there is an appetite amongst members of Congress and this administration and the Federal Trade Commission to frankly take the work that AGs and others have been leading on and take it to the federal level.
Nick Hanauer:
Just to clarify, does the Federal Trade Commission have the rulemaking authority to limit non-competes federally?
Bob Ferguson:
Yes. And so, in fact, I think it’s Commissioner Chopra, if I remember correctly, has actually expressed comments in favor of rulemaking, has written articles about this as well. And so yes, my option would be an absolute expert on the intricacies of FTC. It is my understanding that they have a role here and have rulemaking authority and have been specifically looking at making some changes along those lines. Yes.
Nick Hanauer:
So to me, the non-compete agreement and the no-poach agreement are sort of like two sides of the same coin, they’re anti-competitive practices at the employee level and then at the corporate level, and eliminating them, probably literally eliminating 99% of them should be our policy goal. I think 1%, if non-competes applied to the top 1% of earners and workers, I think we would be in a fair place, but are there other pernicious practices that you know of that are similar that we don’t understand or talk about?
Bob Ferguson:
Just one thing I just want to mention on the point of the no-poach and the non-competes is, is when it comes to no-poach, not only is it bad from a policy standpoint, Nick, what I would say is, we believe they are unlawful, used to be clear, illegal. And I think, well, what indicates my team is right about that is the fact that it was over 200 of some of those powerful corporations in our country, around the world, with the most sophisticated legal counsel at their disposal.
And when we wrote them a letter saying, hey, Burger King, we think what you’re doing is unlawful, either you get rid of and we’re going to sue you, every single one of them, except for Jersey Mike’s, you got it, except for the guys in Jersey. Okay. So I want to be clear. So we send a memo saying here’s our analysis. And each one of them caved rather than fighting us in court, which speaks volumes about where they see what the law is. It was not in their economic interests to get rid of them. They didn’t do it out of the goodness of their heart, let’s be honest. They did because they were about to face a lawsuit and some bad press and penalties from the court. And so I would say from that standpoint, they’re are actually illegal. And that is why your listeners should reach out to their attorneys general, that this is, and it should be a bipartisan issue when it comes to no-poach.
And frankly, one last thing I’ll just add on this is that I’ve read a lot about, hey, from corporate law firms who advise their clients they put out newsletters and stuff, and they’ve written a lot about these no-poach agreements and about our investigation. And they really warn their clients, look, get away from these things, you’re asking for trouble. And so I think that that’s a real positive.
Now look, and some of the large other issues that are out there for workers, look, I guess what I would say is a first, if folks are listening here in Washington State and they see something going on with the worker they know or for themselves, contact my office. If you’re not sure if it’s illegal or not, we want to hear about it. That’s how many of our investigations start. Number two is, I don’t want to say it’s quite like whack-a-mole, Nick, but we get rid of certain things like no-poachers, but as you know, you’ve written about, other things come up. And so what I would say is we have recently concluded this no-poach work in large part because we now eliminate them. We’re open to what that next thing might be for workers here in Washington and across the country. So welcome feedback from people about that.
We have ongoing investigations on issues that as I think we don’t talk in Washington State about our investigations. So I got to be a little careful about that. But what I would say is that we welcome feedback from folks in our state, workers and the impacts on workers that we have in our community. And let my team know. In fact, as an example, a non-compete case we brought was, bringing this into focus, was at a Mercurys Coffee shop here in Washington State, where they literally had a non-compete agreement for the baristas, saying, you couldn’t go work for miles for a competitor within miles of Mercurys. These are people making 15 bucks an hour. And not only do they have those non-competes, they enforced them. One barista, they sued to try to stop that barista from going to another coffee shop a couple of miles down the road. Well, what the heck is up with that? And so these are so damaged worker.
Nick Hanauer:
And it’s so crazy.
Bob Ferguson:
It is. That’s the word for it.
David Goldstein:
That’s so petty, just petty.
Bob Ferguson:
But what’s going on here is that and you guys know what’s going on is you have such an unequal bargaining situation. You’re a barista, you need the job, you’re trying to pay the bills, or you’re just a worker doing your life, they hand you a non-compete, well, what the heck are you going to do? What are your options, as opposed to where you might have some valid non-competes where it’s okay, it’s a high level executive who can hire his or her own legal counsel to advocate for them in the negotiations with the company when they haggle out in non-compete. Well, now, you’ve got a fair negotiating situation going on. We don’t have that for 99.8% of the folks we’re talking about it.
Nick Hanauer:
It really is just a bullying and intimidation tactic to lower turnover and keep wages low at the end of the day for a low wage employer, because it’s not like that barista is going to steal some secret and take it to the other company. Making a cup of coffee is a pretty well understood art, but it does put the fear of God into all the other employees who are now like, well, I guess I can’t leave. I stuck here unless I want to change careers, which triples the friction for those people in the labor market, because now it’s not easy to go get two bucks more an hour across the street or something else like that. They have to really, switching jobs much more seriously and be much more careful about it, which is just, it is just so egregious. And it’s so interesting because it’s just another one of these things that slipped into the framework of how American businesses managed themselves and their employees that is responsible for this giant transfer of wealth from the poor to the very rich.
Bob Ferguson:
I mean, I think you put your finger on something important there in that it’s my sense from having now spent a fair amount of time looking at this and working on the issue is that for a lot of business, like this Mercurys Coffee, my personal view is that they set up these non-competes for these baristas simply because they could and that they had the power.
Nick Hanauer:
The lawyer told them that they could do it. Yeah.
Bob Ferguson:
Bingo. I think that is exactly right. And so they did it because they couldn’t, you are right, there’s no advantage for that Mercurys Coffee shop or [inaudible 00:26:29] to you point. In fairness, they have invested in that employee and they don’t want to lose that employee, but hey, maybe if you want to keep that employee, offer them a better wage so competitor [crosstalk 00:26:39], offer them that promotional opportunity they’re looking for with a competitor, someone down the street.
Nick Hanauer:
And that’s the system we have in the United States, you compete, you compete. It’s a level playing field where you compete. The problem with these non-competes and no-poaches is it tilts the playing field, and tilt is not the right word, but it’s-
Bob Ferguson:
It’s literally called a non-compete.
Nick Hanauer:
Yes. That’s exactly right.
David Goldstein:
And I thought the whole purpose of market capitalism was competition, right?
Nick Hanauer:
Yes.
David Goldstein:
And in the end, it’s anticapitalist, anti-market to impose these non-competes. I’ve got a broader cultural question for you, Bob. I know for decades, state AGs have focused a lot on consumer protection, and your office does that still, but there’s also this new focus on protecting workers. Is that just Washington State? Are you seeing this in AG offices around the country?
Bob Ferguson:
That’s interesting. I guess a couple thoughts about that. So first, no, not just Washington State. That said, I think it’s fair to say that some states have a greater some AGs, some states have a greater focus on these issues than other states. I think that is more, and then that can come from for two different reasons, I think, I’d say, Goldy, one is in my office, we have a lot of resources that we’ve built up to do this work on behalf of workers and consumers. We have a lot of attorneys and professional staff. We just have a large operation to do that. Some AG officers set a little bit differently. And frankly, even if the will was there, they just don’t have the resources there, either their legislature hasn’t invested or any number of reasons they don’t really have, frankly, the ability to do a whole lot in that space. The other way in which you don’t see it being a priority is just the attorney general doesn’t make it a priority, but they have other priorities.
And so that said, I would say that there’s been an increasing focus in fairness, particularly amongst Democratic attorneys general on these issues. So for example, I attend these conferences with my colleagues of both parties. And I think that in general, the role of the attorney general across the country has expanded, the powers of the attorney general are being utilized in ways that weren’t even imagined 25 years ago, to be honest, among state AGs. Back in 25 years ago, a state AG was typically or sort of the quiet lawyer for our clients at the state. Now, it’s a totally different world as your listeners will know. And that includes this kind of work.
And frankly, as attorney general here in Washington, we were really not doing this work even just eight, nine years ago, to be honest with you, that this was literally being intentional about this, talking to our friends in the labor community, labor leaders, workers, you name it, having those conversations saying, hey, where do you see the gaps? Where are the problems and how can we help with the tools that we have? And so I do think that there is a greater awareness amongst AGs and a greater willingness to use the tools that they now realize they actually have.
Nick Hanauer:
Yeah. That’s so important. And it’s just so powerful and so useful for attorneys general to help with these things, to be, like who else is going to do it? Who else is on the side of that barista? That barista cannot afford some fancy attorney to defend their interests. It really does take an office like yours to step in and try to level the playing field, just such a powerful and important example of a useful intervention by the state.
Bob Ferguson:
That is exactly right. And the barista, you’re right, the barista does not have that ability to bring in an attorney, that attorney has a little motivation to get a case like that. They’re not going to make any money off a case like that. And when you get to the no-poach, the worker doesn’t even know it exists. So how the hell can they even advocate for their rights if they could afford an attorney, which they cannot? And so to your point, yes, the role of the attorney general is so important in this space because you are able to advocate for a group of people who frankly lack the resources to take on that Mercurys Coffee shop or that McDonald’s, that’s where we can come in with the resources we have to get those subpoenas out the door, to send those friendly letters saying, change your practices or we’re going to file a lawsuit against you. And that’s what we can do. And AGs all across the country have basically the exact same power that I’ve got here in Washington State.
Nick Hanauer:
So without encouraging you to talk about ongoing investigations, what are the opportunities for your office to do more for workers that you see in the future? Are there other things that you want to fix that we should keep our eye on?
Bob Ferguson:
Absolutely. So I’d say a couple areas. Number one, I just saw your listeners have a sense, my office has broad authority to advocate on behalf of workers. It could be your working conditions. We brought a lawsuit against the federal government for workers in Washington State, as you well know, but for those who may not know, we have a Hanford nuclear waste site that has the most highly radioactive nuclear waste in all of the Western Hemisphere, workers, they were trying to clean that up, they’re exposed to vapors there, federal government who owns that facility was not adequately protecting workers with gear. We filed a lawsuit against the Obama administration saying this isn’t right. And we prevailed.
So it can be literally taken on the federal government on worker protection issues. It can also be, for example, withholding wages from workers. And we see that frequently where, hey, someone who’s working as a waiter or waitress is not getting their tips, their employer does not pass it on to them. Wage theft is going on and is far more prevalent than many people realize. So we can actually investigate companies that are doing that and bring lawsuits against companies, which we’ve done. We have given the ability to criminally charge entities, companies who do that, which we’ve done as well.
David Goldstein:
So Again, to our listener here, if you’re in Washington State and you suspect you’re the victim of wage theft, give the attorney general’s office a call.
Bob Ferguson:
In fact, that’s so important because, sorry, just interject there, but really, workers are our eyes and ears. They’re on the ground. They’re the one experiencing it. So we work closely with labor leaders, for example, because they often hear from their folks about what’s going on. But a lot of folks aren’t represented.
David Goldstein:
Most aren’t.
Bob Ferguson:
Bingo. And so we want anyone to reach out to us, if you feel you’ve not been treated fairly in any of these ways, your working conditions, your wages not being sent to you, we want to hear about that because we do have broad power to do then, by the way, also, we can advocate for changes in state law in Washington State. Believe it or not, if a company had been found to have willfully violated our Wage Theft laws, willfully been found to violate our Wage Theft laws, Washington State still contracted with those companies. In other words, they could still compete for contracts with the State of Washington. Well, I’m sorry, what’s up with that? You are a known Wage Theft violator, you’ve done that willfully and you still get a contract with the State of Washington, I’m sorry, no. So I proposed a law towards state legislature saying, if you’ve been found to have violated those laws, you don’t get a contract with us. And that passed actually.
Nick Hanauer:
So wage theft is a thing that just drives me crazy. And it is approximately a $70 billion a year problem nationally, which is, that’s a lot of money. Is it possible to criminally? Is it only a civil penalty or are there criminal charges that can be brought?
Bob Ferguson:
When we enforce it, primarily, we’ve used civil authority. Now I don’t want to get bogged down in the details, but Washington, it’s a little bit different in terms of the AG in Washington State is different than many other AGs, in which I don’t have general criminal authority. I can get criminal authority if a prosecutor hands me a case. So I don’t want to get in the weeds too much, but whereas in some states, the AG is the criminal prosecutor or has a lot more criminal authority. Washington’s just structured a little bit differently. So primarily, I don’t want to paint with too broad a brush, but primarily, we have civil authority, but we have had circumstances when prosecutors have referred cases to us. And then that gives us the authority. And so we can do both, but primarily, in Washington State, it’s been civil, but for other states, that could be very different.
Nick Hanauer:
But in the State of Washington, if I deliberately and willfully steal the wages of my workers, could I be held criminally liable? Could I go to prison for that?
Bob Ferguson:
Absolutely. Your local prosecutor has criminal authority. You’re stealing, you’re stealing from somebody. And so it’s local in Washington State, again, in our 39 counties, those 39 county prosecutors, they have the criminal authority in our state. And so they have the ability to bring a case and charge of case if they feel an employer is stealing wage theft, is stealing from their employees. And look, let’s just be candid about. I’m one of seven kids, I’m from a big Catholic family, there’s six boys and one long sister in my family, and I’ve got a brother who spends much of his year up in Alaska. He’s been doing that for, God knows how many years he’s going up to Alaska. And he’s got a demanding job. And he works 16 hours a day, every day for months on end. And his work helps put fish on the table here in Washington State and across our country.
Well, look, man, if someone was not paying my brother every dime that he most certainly is earning, that would piss me off. I mean, a lot depends on his paycheck for his family. And my brother, John is not alone. Workers all across our country. And the idea they’re going to steal from my brother, John, who’s up in Alaska right now, away from his family, working to help all of us eat, that’s BS. And so I take that personally. And that’s the view that I’ve tried to instill in my team is, hey, imagine that’s your sibling, your kid, your parent, who they’re not protecting with the right gear or they’re stealing the wages or they’re limiting your options to go to another company, that’s the way, make it personal, because that’s how I feel about it.
Nick Hanauer:
That’s great. So Bob, we always finish with-
David Goldstein:
He may have just answered the question before you asked it, Nick.
Nick Hanauer:
The question is, why do you do this work? And I think you just really successfully answered it. It’s like, yeah, it’s important to take this stuff personally.
Bob Ferguson:
Well, it is. I mean, look, I often have people say, hey, Bob, you’re a hard working guy. I laugh at that, because I’m not hardest working guy in my family. That’s my brother, John. That’s my brother, John. My work ethic, I think, is pretty good, but it pales compared to him. That’s just the truth. And that is true for so many workers in our state, the folks doing the toughest work, the most demanding work at lower wages.
Well, it’s incumbent upon all of us as policy makers, as elected officials to be that advocates we talked about, because let’s be honest, it’d be tough for John with all that he’s got going on to be that advocate. You need someone who can step in and has that power. And thankfully, it’s attorneys general who have broad authority to step up and fight those fights. And frankly, that’s the motivator for me. And it’s just so rewarding because you feel you’re really making a difference in people’s lives. And if you’re in public service, well, that’s what it’s all about.
Nick Hanauer:
That’s awesome. Well, Bob, thank you so much for being with us and for all of your work, this whole non-compete, non-poach thing is a really big deal to millions and millions and millions of people. And it’s super cool that you’ve applied your talent and energy to it. So thank you.
Bob Ferguson:
I really appreciate what you guys are doing and just highlighting these issues for so many people across our country. It’s so important. We’ve all got a role to play whatever role that is. My messages to people, your listeners, use whatever power you’ve got, right? That’s how we make change in this country.
Nick Hanauer:
Cool. Well thank you for being with us and we’ll chat soon.
Bob Ferguson:
It’s a deal. Thanks.
Nick Hanauer:
Okay. Take care, Bob.
Bob Ferguson:
All right.
David Goldstein:
Bye-bye. So Nick, just to follow up on how important an attorney general can be.
Nick Hanauer:
Yes.
David Goldstein:
Pick out some of the numbers here from we talked about after Bob’s office went after those no-poach clauses, went and contacted corporations nationwide. 237 corporate franchisors ranging from McDonald’s to Jiffy Lube signed legally binding agreements to end no-poach contracts nationwide. That’s every company they went after with the exception of Jersey Mike’s, because Jersey Mike’s Jersey knows a guy.
Nick Hanauer:
Yeah, exactly.
David Goldstein:
They eventually beat them in court, but everybody else voluntarily agreed to end their no-poach agreements, that covering 4,700 Washington locations and nearly 200,000 locations around the country. That’s one AG from one state, improving the lives of millions of American workers. And I think, I want to reach this into, this has been a very specific narrow conversation in a way, but I want to bring this out into more the economic theory side of things, because, and we mentioned this in talking to Bob these no-poach agreements and these non-compete contracts, I mean, literally, non-compete, it’s anti-competitive. We hear the free marketers talking about what you want is a free market, we want the market to be as free as possible, we don’t want government interfering in our ability to make that market less competitive by preventing our employees from working for our competitors. I mean, it is just totally crazy, this idea that markets should be free except for labor markets where the employer should have as much power as possible to suppress wages and keep workers down.
I mentioned with Bob that historically, at least for the past several decades, AGs have played a pretty active role in protecting consumers. It is a side of neo-liberalism that we focus on the interest of consumers and not on workers, ignoring the fact that all consumers are also workers, but I’d argue, and I think if you believe in markets, that by eliminating these no-poach agreements and these non-compete agreements, it’s better for consumers in the long run because the market starts to work better. It’s more competitive, these companies now have to work harder to retain their employees, to retain quality employees. And quality employees provide better products and services. And in the end, the consumer wins too. That is assuming you believe in markets. If you don’t believe in markets, then we have a whole nother conversation to have, you go start talking to the socialists, but don’t tell me you believe in markets, but somehow this is interfering in markets too.
Nick Hanauer:
Yeah.
David Goldstein:
No, [crosstalk 00:41:36] market’s competitive.
Nick Hanauer:
It’s utter nonsense. And of course, we know that the vast majority of people who claim to be free marketeers are nothing of the sort, that they are simply wealthy folks or corporate interests that just want to defend their narrow self-interest. And any policy which helps with that, therefore, and any policy, which diminishes their power or profits, they hate. And you will not hear the, as far as I know, the Heritage Foundation arguing that we should limit non-compete, it’s just not likely to happen. So anyway, fascinating subject, definitely lots of work to be done at the federal level and in other states. And I really do think that if non-competes apply to any more than the top 1% of workers, we’ve gone too far with them.
Speaker 3:
Pitchfork Economics is produced by Civic Ventures. If you like the show, make sure to subscribe, rate and review us wherever you get your podcasts. Find us on Twitter and Facebook at Civic Action and Nick Hanauer. Follow our writing on Medium at Civic Skunk Works and peek behind the podcast scenes on Instagram @pitchforkeconomics. As always from our team at Civic Ventures, thanks for listening. See you next week.