McDonald’s Must Face No-Poach Claims Like Those Burger King Beat

McDonald’s Corp. can’t dodge claims that it drove down wages by enforcing a “no poach” agreement barring different franchise locations from hiring one another’s workers, a Chicago federal judge ruled.

Judge Jorge L. Alonso gave the proposed employee class action a green light April 24. He rejected the fast food giant’s argument that the lead plaintiff lacked standing because she was never denied a job based on the no-poach policy.

“The argument misses the point of plaintiff’s alleged injury: Plaintiff alleges she suffered depressed wages,” Alonso wrote. “Plaintiff’s claim is akin to a supplier who sells at a reduced price due to the anti-competitive behavior of a cartel of buyers.”

Nor did the suit fail to trace the allegedly depressed wages to the no-poach policy, the judge found. The lead plaintiff sufficiently backed up her claim that the policy’s effects could be isolated from broader economic conditions like the unemployment rate, Alonso said.

“Plaintiff’s causation allegations are plausible due to basic principles of economics,” he wrote. “If 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.”

The suit, consolidated with a parallel case in the U.S. District Court for the Northern District of Chicago, is part of a wave of challenges to franchise no-poach provisions amid considerable uncertainty about their legality.

Courts have yet to arrive at a settled framework for evaluating such pacts, given that they involve both horizontal elements—agreements among different franchise locations—and vertical ones, like the agreements between brand parents and their franchises.

The issue has driven a wedge between top antitrust authorities. The Justice Department even took the unusual step of making its views known in a state court case. No-poach clauses may decrease competition between different franchises under the same banner, but they could make a brand more competitive against its rivals, the DOJ has argued.

Other suits raising the question involve multiple fast food chains, as well as other companies that operate on a franchise model, like tax preparer H&R Block Inc.

Burger King escaped a franchise no-poach suit on somewhat technical grounds last month. A judge held that the employee plaintiffs overreached by alleging per se antitrust violations instead of arguing that the provisions were anti-competitive under all the circumstances.

The proposed class is represented by McCune Wright Arevalo LLP, Lieff Cabraser Heimann & Bernstein LLP, and Scott+Scott Attorneys at Law LLP. McDonald’s is represented by Gibson Dunn & Crutcher LLP and A&G Law LLC.

The case is Turner v. McDonald’s USA LLC, N.D. Ill., No. 19-cv-5524, 4/24/20.