Have your wages kept up with inflation over the years? If not, multiple factors may be at work, including increased automation, foreign competition, and the increased costs to employers for health benefits. But some employers may be reaping the benefits of fewer employees in your geographic area — and they may be breaking the law.

Fewer employers = lower wages

One explanation for lower wages is monopsony, a condition in which a large employer has near-monopolistic control over the market, due to sheer size. Over the past decades, only the highest paid employees have benefited from steady wage gains, according to the White House’s Council of Economic Advisors.   Wage growth for most workers has been slow and failed to keep up with gains in overall productivity.

A reduction in competition among employers for job candidates can result in slower wage growth. If the population remains the same or grows, but the number of employers shrinks, there is less competition to attract labor. Employers’ ability to dictate wages when they are “the only game in town” is monopsonistic. The greater the number of employers competing for workers, the likelier they are to improve wages and benefits to attract the best worker candidates.

If there are few potential employers for workers with your skills and experience, there’s less incentive to make a job attractive. If you want to work in your field, you may need to choose lower pay, find another line of work, or move.

Monopsony is the result of the job market developing, or companies merging, closing, or moving out of your area. Another wage suppressant is when employers illegally work together to control wages.  Agreed compensation rates or refusing to hire employees away from each other could violate state and federal anti-trust laws.

Employers can’t legally suppress job opportunities and wages

Over 100 years ago, anti-trust laws and public policy were designed to encourage a fully functioning marketplace, whether purchasing products or services or paying wages. Laws dictate what practices are illegal, while state and federal governments can enforce the laws and private litigants can sue for violations. Unreasonable restraints of trade are illegal as are specific practices, such as agreements among parties to fix prices or wages, divide markets, or rig bids.

Texas exemplifies how employment manipulations can result in law enforcement. The Federal Trade Commission (FTC) is the agency that enforces federal anti-trust law. Last year, the Agency announced a proposed settlement of a claim against a group of companies that provided physical, occupational, and speech therapists and therapist assistants through home health agencies. According to a press release,

• Owners of two staffing companies agreed to decrease therapist pay rates to the same level and invited several competitors to do the same to try to prevent therapists from switching staffing companies. The agreement came about after the parties learned a home health agency planned to reduce what it was going to pay to the staffing companies for therapist services.
• Defendants were charged with violating the Federal Trade Commission Act by unreasonably restraining competition to offer competitive pay rates to therapists, fixing or decreasing pay rates for therapists and depriving therapists of the benefits of competition among staffing companies.
• Under the order, the parties are required to obey the law, including promising not to agree with any person to lower, fix, maintain or stabilize the compensation they or the other person pays, or is willing to pay, in competing with each other for therapists or other types of employees and independent contractors. They also agreed not to ask competitors to enter such agreements or exchange information with competitors related to compensation of employees and independent contractors.
• The proposed settlement doesn’t include restitution for workers whose wages were impacted.

“No poaching” agreements make it harder for workers to find new jobs

Anti-trust violation can come about when employers agree not to “poach” workers from each other. As a result, employees may stay longer in a position because it’s harder to find a new job.  Their wages are kept artificially low. The Washington Post reported last year that seven fast food chains agreed to remove “no-poaching” clauses in contracts that prevented employees from taking jobs at other franchises of the same chain.

The companies include Arby’s, Carl’s Jr., McDonald’s, Jimmy John’s, Auntie Anne’s, Buffalo Wild Wings, and Cinnabon. Under agreements with Washington State’s Office of Attorney General, the companies pledged to remove these “no poach” clauses from contracts with franchisees. Arby’s, Carl’s Jr., and McDonald’s agreed not to enforce these agreements for all of their more than 25,000 stores nationwide.

Under the targeted contract language,

• An employee of one franchise may have sought a job with another franchise and been rejected because of a contract the individual wasn’t a party to concerning language the worker didn’t know anything about.
• The contract was between the franchisor (McDonald’s, for example) and the franchisee (the company operating the restaurant).
• The franchisee was legally obligated not to hire workers away from another franchisee.

According to the New York Times, Princeton economists, Alan Krueger and Orley Ashenfelter, published a 2017 study estimating this “no poach” language affected about 70,000 restaurants in the US, or more than a quarter of fast food outlets. After looking at franchise contracts of 40 of the country’s largest chains, Krueger and Ashenfelter concluded that these restrictions limited competition and turnover, likely depressing worker wages as a result.

Conclusion

If you believe your job opportunities are being reduced and your wages illegally held down due to unlawful agreements by franchise owners or other employers, let us investigate. To get started, contact the Kingston Law Group to arrange a near-term initial consult at a reduced rate.  We will listen to your facts face-to-face, explain the law, and help you develop a plan to achieve economic and social justice. We accept credit cards and offer general appointments from 9 a.m. to 5:30 p.m., Monday to Friday, plus evening appointments during the week by pre-arrangement only.  Call us today.  You will be glad you did.

By Hanan M. Isaacs, Esq.