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H&R Block's 'no-poach' hiring practices under fire from lawsuit, state investigation

Mark Davis, The Kansas City Star on

Published in Business News

Weeks after a former employee sued H&R Block alleging harms she suffered under its "no-poach" hiring practices, the Kansas City-based tax firm also faces a Washington state investigation into the same issue.

No-poach hiring practices have been widespread among fast-food companies. They generally prohibit franchise operators from hiring the employees of any other franchise operator in the chain.

Several states' attorneys general began in July to challenge no-poach clauses in the franchise contracts of many fast-food chains.

On Wednesday, Washington Attorney General Bob Ferguson's office confirmed it is investigating H&R Block along with many other companies identified in an academic study as using no-poach clauses in franchisee contracts. A spokeswoman in Ferguson's office declined to discuss the inquiry into H&R Block's practices.

More than three dozen companies with franchise restaurants and stores have now signed formal agreements with Ferguson's office to end their use of no-poach clauses nationwide. The list includes McDonald's, Pizza Hut, Applebee's, IHOP, Denny's, Burger King and Cinnabon.

An H&R Block spokeswoman declined to provide information about the company's current practices for the roughly one third of Block tax offices that are owned and run by franchisees. She would neither confirm nor deny an earlier report by The Washington Post that had cited an email from an H&R Block spokeswoman saying the company had agreed to stop the practice.

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The lawsuit against H&R Block came late last month from Melissa Ramsey, who had been managing an H&R Block tax office in Fairway when it was shut down. She naturally sought work at other Block offices, the lawsuit said.

"They refused to talk to her," said Ramsey's attorney, Rick Paul. "Because of that clause, they wouldn't even talk to her."

The lawsuit said that since 2009, H&R Block has included a no-poach clause in the standard contract that governs the the roughly 3,300 Block tax offices owned and run by franchisees. It also said H&R Block followed a no-poach policy by avoiding employees of franchise offices when hiring for the nearly 6,700 tax offices H&R Block itself operates.

Block's policy means tax office employees have paid dearly -- including taking lower wages -- because they weren't able to market their skills, some specific to working at H&R Block, to the places most interested in those skills, namely other H&R Block offices, the lawsuit said.

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