The suit is part of a wave of challenges to franchise no-poach provisions amid considerable uncertainty about their legality. Franchise employees have filed a number of private class actions in federal courts across the country. The complaints challenge the use of no-poach agreements in franchise agreements, with lawsuits pending against several fast-food restaurant chains, tax preparation services (e.g., H&R Block), car repair services (e.g., Jiffy Lube) and other franchise-based businesses that include broad no-poach clauses in their franchise agreements. The private actions typically allege that agreements among the franchisor and franchisees to avoid poaching employees violate Section 1 of the Sherman Act and call for per se treatment or, in the alternative, quick-look review of the alleged conduct.
For what its worth, the Department of Justice has chimed in on these franchise no poach agreements by filing a statement of interest in a state court case in Washington against Carl’s Jr. Arby’s, Auntie Anne’s franchisees back in 2019. Basically, the DOJ argues that no-poach clauses may decrease competition between different franchises under the same banner, but they could make a brand more competitive against its rivals. In other words, fast-food franchisees’ agreements to not poach employees could have pro-competitive benefits and may not always result in antitrust violations. The DOJ’s statement of interest made three primary arguments (1) the franchise model does not constitute a hub-and-spoke conspiracy, (2) quick-look analysis is inappropriate, and (3) rule of reason is appropriate. It is unclear if other courts will follow the DOJ’s guidance and become more willing to dismiss these cases. Clearly, the Northern District of Illinois is allowing these cases to go forward.