- A district court erred when it dismissed a lawsuit against a group of Burger King franchisees alleging the restaurants unlawfully maintained non-poaching agreements prohibiting them from hiring each other’s employees, the 11th Court appeal of the United States circuit was held on Wednesday (Arrington v Burger King Worldwide, Inc.No. 20-13561 (11th Cir. Aug. 31, 2022)).
- The workers claimed that the company’s agreements prevented them from obtaining employment at other franchised restaurants, which would have led to artificially lower wages, reduced benefits and reduced job mobility. The lawsuit further alleged that the agreements constituted an unreasonable restriction on trade, in violation of the Sherman Antitrust Act.
- The district court found that Burger King and each of its franchisees constituted a “single economic enterprise” incapable of conspiring under the Sherman Act. But the 11th Circuit reversed itself, comparing the Burger King franchise network to National Football League teams, which faced a similar suit. “Like the 32 [NFL] teams … Burger King and its separate, independent franchise restaurants compete with each other — in this case, for employees,” the court said.
Overview of the dive:
The case touches on an area of employment law that has received significant attention from regulators in recent years.
In January 2018, the US Department of Justice caused a sensation when he announced he would issue indictments for employers’ non-poaching agreements and “naked wage-setting agreements.” This announcement followed a 2016 joint document released by the DOJ and the Federal Trade Commission in which the two agencies savvy HR professionals on the antitrust implications of agreements that limit competition for the same employees between organizations. The consequences could include jail time, among other penalties.
In the years that followed, lawyers talked about the possibility that employers may face criminal charges for non-poaching agreements, among other employment constructions. The DOJ made this idea a reality when, in 2021, it filed his first criminal charge alleging that a group of employers had entered into a non-poaching agreement.
Groups of employers have spoken on the subject. For example, the Society for Human Resource Management recently filed an amicus brief in a case involving non-poaching agreements which discussed the confusion employers can encounter in determining what types of agreements are illegal, particularly in situations where an employer attempts to partner with multiple recruiting firms to provide labor on the same project.
At the same time, employers — especially those in the restaurant industry — have started to move away from agreements in recent years. In fact, the 11th Circuit noted in Arrington that “Burger King reportedly removed so-called ‘no poaching, no hire’ language from new franchise agreements as of 2018, although some restaurants signed older versions of the franchise agreement that included this language.
Employers may have other options when it comes to implementing restrictive covenants for certain types of jobs. At SHRM’s annual conference in 2022, a lawyer said that agreements such as non-solicitation clauses and non-recruitment clauses could be viable alternatives in certain circumstances.