franchisee

McDonald’s couldn’t get its no-poach claims dismissed for lack of standing so it will have to continue to litigate allegations that it drove down wages by enforcing a “no poach” agreement barring different franchise locations from hiring one another’s workers. The case is Turner v. McDonald’s, USA LLC, N.D. Ill., No. 19-cv-5524, 4/24/20 which is consolidated with Deslandes v. McDonald’s, USA, LLC, N.D. Ill., No. 17-cv-4857.

McDonald’s arguments were limited because of past decision in Deslandes. In Deslandes, the court held that the plaintiff employees plausibly alleged that the franchises’ no-poach restraints could be found unlawful under a quick-look analysis so McDonald’s did not move to dismiss for failure to state a claim.

The Northern District court rejected McDonald’s argument that the lead plaintiff lacked standing because she was never denied a job based on the no-poach policy. The Northern District’s opinion stated that “[t]he argument misses the point of plaintiff’s alleged injury: Plaintiff alleges she suffered depressed wages.” The court added that “[p]laintiff’s claim is akin to a supplier who sells at a reduced price due to the anti-competitive behavior of a cartel of buyers.” The court also found that complaint sufficiently supported the claim that the policy’s effects could be isolated from broader economic conditions like the unemployment rate. The court added that “[p]laintiff’s causation allegations are plausible due to basic principles of economics.” Indeed, “[i]f fewer employers compete for the same number of employees, wages will be lower than if a greater number of employers are competing for those employees.” So, the case will move forward.

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.

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McDonald’s Can’t Get No-Poach Claims Dismissed