New Evidence on Employee Noncompete, No Poach, and No Hire Agreements in the Franchise Sector

Authors:

Peter Norlander, Loyola University Chicago

Abstract:

This paper presents new evidence about the prevalence, source, scope, content, and variety of anti-competitive behavior in the labor market. Drawing from a text corpus of 17,785 franchise disclosure filings, I find that 26% of filings from January 2011-August 2022 contained an employee noncompete clause that requires franchisees to bar employees from working for a competitor after leaving. Further, 44% contained a non-solicitation clause barring recruitment between firms, and 25% contain a no hire clause. Using new open-source, replicable methods to classify unstructured text, this paper also publicly releases: a document corpus, the software used to analyze the data, a knowledge base of rules to detect anti-competitive clauses, and an open-source machine learning classifier to detect no poach clauses. While prior evidence on anti-competitive practices largely draws from individual complaints, survey data, and limited hand-coded samples, this paper spotlights a large and representative sample of previously hidden inter-firm contracts that block employee mobility and describes tools that can automatically identify future unseen instances.