Burger King Hit with Antitrust Class Action Lawsuit Over Alleged No-Poach Agreements Between Franchises

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A proposed class action lawsuit filed in Florida alleges Burger King overstepped federal antitrust laws by including in its franchise agreements anticompetitive “no-poach” clauses that prohibit franchisees from hiring or soliciting each other’s employees who have worked for the fast food heavyweight within the last six months. The 29-page complaint describes the alleged conduct of defendants Restaurant Brands International, Inc.; Burger King Worldwide, Inc.; and Burger King Corporation (BKC) as “an illegal conspiracy,” the effects of which have led to suppressed labor market competition, limited job opportunities and stagnant wage growth.

According to the lawsuit, Burger King requires all franchisees to sign agreements that include clauses that stipulate they are not to hire or solicit workers at any other Burger King restaurant or eatery owned by Burger King Corporation. The suit notes this no-hire/no-solicitation item is in effect both while an employee works for Burger King and for six months after the end of the individual’s employment. Per the suit, the language of Burger King’s no-poach clause reads:

“Neither BKC nor Franchisee will attempt, directly or indirectly, to entice or induce, or attempt to entice or induce any employee of the other or of another Franchisee of BKC to leave such employment, or employ such employee within six (6) months after his or her termination of employment with such employer, except with the prior written consent of such employer.”

This collusive policy, the cases argues, has allowed Burger King franchisees to keep employee turnover and wages low while boosting their own profits. The suit adds that while there is a ripple effect in that other franchises are effectively encouraged to do the same thing, Burger King’s franchise agreement also contains a drawback for franchise operators who decline to fall in line.

“The franchise agreement also gave BKC the right to terminate franchisees’ rights to operate their franchises in the event that they violated the agreement,” the complaint reads, “including the No-Poach Clause. According to the suit, this meant that franchisees were compelled to follow the No-Poach Clause.

At the end of the day, Burger King’s no-poach clause, the case argues, has all but eliminated competition between franchises for employees. Worse, it seems Burger King employees are none the wiser to the agreement meant to keep them where they are. From the complaint:

“Since the No-Poach Clause is part of Burger King’s franchise agreement and is not mentioned in Burger King’s or its franchises’ employee agreements or other employee materials, Burger King restaurant employees are not made aware of the No-Poach Clause. For Burger King to deny Burger King restaurant employees the knowledge that the No-Poach Clause was operational was fraudulent concealment, and it withheld information that would have been material to their decision on whether to accept a position with a Burger King franchise at the time of hiring, had they known that the No-Poach Clause would have a significant negative effect on their wages, benefits, working conditions, upward mobility, and choice of locations at which to work.”

The complaint can be read below.