Supreme Court Denies McDonald's Petition to Review “No-Poach” Antitrust Case
On March 18, the Supreme Court denied McDonald's petition to review a Seventh Circuit ruling that revived an antitrust case targeting McDonald's use of “no-poach” provisions in its franchise agreements.
03.22.24
The provision in question blocked McDonald’s franchisees from hiring employees that worked at another location within the previous six months.
Two former McDonald’s employees filed separate lawsuits against McDonald’s alleging that the “no-poach” provision violated antitrust law and caused the employees to miss out on professional growth opportunities and higher wages. The cases were consolidated in July 2021, and the U.S. District Court for the Northern District of Illinois denied the former employees’ request for class certification. In June 2022, the district court granted McDonald’s request for judgment on the pleadings, finding that there was too much competition for the workers’ labor to support their antitrust claims and the no-poach provisions amounted to pro-competitive ancillary restraints. The U.S. Court of Appeals for the Seventh Circuit revived the case in August 2023, finding that the former employees’ allegations were sufficient and the trial court prematurely decided the “complex” antitrust issues. McDonald’s subsequently petitioned the Supreme Court to reverse the Seventh Circuit’s decision, but the Supreme Court declined to review the case. The case will now be remanded to the U.S. District Court for the Northern District of Illinois for further proceedings.
Both federal and state agencies have been focused on antitrust issues in labor markets in the past several years, especially agreements between companies to fix wages or to not hire workers from one another. The result of these initiatives has materially affected the franchise industry. As a result of a multi-year effort by the Washington State Attorney General to change industry-standard hiring provisions in franchise agreements, over two hundred franchise systems, including McDonald’s, have agreed to end the use of employee “no-poach” provisions in franchise agreements registered for use in the State of Washington. In October 2023, the U.S. Department of Justice stated in an amicus brief that “no-poach” provisions may violate antitrust laws even in the franchise context.
If you have questions about the case or no-poach provisions, please contact a member of the franchise & licensing practice group.
Co-authors Justin Csik, partner, and Adam Haft, associate, are members of the Corporate and Securities Department at Klehr Harrison.