McDonald’s is asking the U.S. Supreme Court to hear a case to determine whether franchises can enforce rules against hiring another franchisor’s employees within the same chain. The fast-food giant submitted an appeal to the court on Nov. 21. The company is no longer using a no-poach rule in its franchise agreements.
McDonald’s has more than 2 million workers at about 40,000 franchised restaurants worldwide. It did not respond to a request for comment. We’ve collected a group of articles on the news from SHRM Online and other sources.
No Hiring McDonald’s Workers from Other Franchises
Under the no-poach clause, McDonald’s franchise operators agreed not to hire another franchisor’s employees, or those employed directly by McDonald’s, for six months after the employees’ last date of employment with either entity. A separate clause prohibited franchises from soliciting other franchises’ employees.
In June 2022, a federal district court rejected employees’ argument that the no-poach rule violated the Sherman Antitrust Act. But in August 2023, the 7th U.S Circuit Court of Appeals held that the lower court had done so too early. It vacated the judgment and remanded the case for further proceedings.
Within the last five years, multiple fast-food chains have removed no-poach clauses from their franchise agreements, after state attorneys general launched investigations.
(HR Dive)
Franchises Competing
A McDonald’s manager first brought her class-action antitrust suit against the restaurant chain in 2017 after she had to decline a higher-paid job at another McDonald’s franchise because of the company’s anti-poaching agreements. The fast-food giant claimed the agreements were necessary to prevent franchisees from stealing each other’s employees and curb the loss of training costs, in addition to improving consistency and quality.
Analyzing Economic Impacts of No-Poach Rules
The 7th Circuit’s ruling is discouraging for franchisors and firms that use ancillary restraints, such as no-hire or no-poach provisions. The circuit court’s decision makes it more difficult for companies to argue that such restraints were ancillary. The circuit court did not go so far as to hold that McDonald’s no-hire provisions were not ancillary restraints. Instead, it remanded and ordered that a careful economic analysis be performed to determine if the provisions qualified as ancillary restraints.
Stopping Monopolies
The Sherman Antitrust Act of 1890 was the first measure enacted by the U.S. Congress to prohibit monopolies, based on Congress’s power to regulate interstate commerce. It outlaws unreasonable restraints on trade, such as wage fixing, price fixing, bid rigging and no-poach agreements in some situations. The U.S. Department of Justice released guidance for HR professionals in 2016 that mentions no-poach agreements nine times, signaling the agency’s prioritization of the issue.
(SHRM Online and SHRM Online)
