Hot on the heels of obtaining a guilty plea in a contract nursing services antitrust case in Nevada, the Department of Justice, Antitrust Division, and the Federal Trade Commission have filed an amicus brief with the 7th Circuit supporting an appeal of a decision that no-poach/no-hire restrictions in McDonald’s franchise agreements were not an antitrust violation.
In two related cases, Deslandes v. McDonald’s USA, LLC and Turner v. McDonald’s USA, LLC, employees of certain McDonald’s franchises sued McDonald’s (the parent company and certain franchises, among others), alleging that, until 2017,1 the franchise agreements imposed unlawful restrictions on hiring that caused them to earn less than they would have earned if they had been able to move freely between franchises.2
The challenged language is as follows:
Interference With Employment Relations of Others. During the term of this Franchise, Franchisee shall not employ or seek to employ any person who is at the time employed by McDonald’s, any of its subsidiaries, or by any person who is at the time operating a McDonald’s restaurant or otherwise induce, directly or indirectly, such person to leave such employment. This paragraph . . . shall not be violated if such person has left the employ of any of the foregoing parties for a period in excess of six (6) months.
As described by the amicus brief, the District Court found that his language “would constitute a horizontal ‘no-hire’ agreement that, if ‘naked,’ ‘would be a per se violation.’ . . . [but] declined to apply the per se rule because it viewed the alleged agreement as ‘ancillary to an agreement with a procompetitive effect’—the ‘franchise agreement.’”
The FTC and DOJ argue that the District Court was wrong, and should have applied a per se rule.
We shall see.
[1] According to the amicus brief, the plaintiffs contend that “in 2018, McDonald’s entered into an agreement with the Washington Attorney General that required McDonald’s to stop including the no-hire/no-solicitation provision in future franchise agreements and to stop enforcing the provision nationwide.” (Internal quotation marks omitted.)
[2] If you tend to prefer Burger King over McDonald’s, rest assured there is a similar issue cooking with the Burger King franchise agreements. There, on August 31, 2022, the 11th Circuit reversed the United States District Court for the Southern District of Florida’s dismissal of the case, concluding that the franchises were independent actors and therefore the franchise agreement was “concerted action” under Section 1 of the Sherman Act. The case is Arrington v. Burger King Worldwide, Inc., 47 F.4th 1247 (11th Cir. 2022).