Earlier this month, a group of 11 state attorneys general announced that they have asked eight fast-food franchises to provide a copy of their franchise agreements to determine whether such agreements contain no-poaching restrictions, which prohibit franchisees from hiring, i.e., "poaching," each other's workers.
Specifically, attorneys general from California, Illinois, Massachusetts, Maryland, Minnesota, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, and the District of Columbia sent the requests to Arby's, Burger King, Dunkin' Donuts, Five Guys Burgers and Fries, Little Caesars, Panera Bread, Popeyes Louisiana Chicken, and Wendy's, with a deadline to respond by August 6, 2018.
This request comes on the heels of a binding agreement between the attorney general for Washington State and Jimmy John's, Arby's, Cinnabon, Auntie Anne's, McDonald's, Buffalo Wild Wings, and Carl's Jr., in which the companies agreed to drop the no-poaching restrictions and allow their employees to seek employment with other branches of the same chain.
The no-poaching agreements first emerged in the spotlight when the Department of Justice uncovered such arrangements between the largest companies in the Silicon Valley who agreed not to "cold call" each other's high-tech employees. The Department of Justice's antitrust action was quickly followed by a class action on behalf of the employees who alleged that they had suffered wage depression due to the no-poaching agreements among their employers. In 2015, the settlement website for the class action announced that Adobe, Apple, Google, and Intel had reached a settlement of $415 million and other defendant companies had settled for $20 million.
In October 2016, the Department of Justice issued an Antitrust Guidance for Human Resource Professionals explaining that it considers no-poaching agreements to be a violation of antitrust laws. Earlier this year, the department's representatives stated that the Department of Justice will soon begin to criminally prosecute such arrangements. Thus, while the recent focus from the state attorneys general has been on the fast food industry, where, according to various studies, 50 to 80 percent of franchises have been using no-poaching agreements for many years, other industries are likely to face similar investigations in the near future from both the Department of Justice and the state authorities.
As federal and state governments contur to scrutinze no-poaching agreements, companies must reexamine their policies and agreement to determine if they have no-poaching clauses or informal no-poaching policies, and eliminate such policies before the government comes knocking on their doors.
Lewis Brisbois attorneys can help revamp companies' internal policies and contracts to comply with the Department of Justice regulations while helping the companies maintain their competitive edge.
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