Antitrust Class Action Claims Pizza Hut Orchestrated ‘No-Hire’ Agreement Among Franchisees

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A proposed class action lawsuit filed in Texas alleges Pizza Hut, LLC “orchestrated, dispersed, and enforced” a no-solicitation and no-hiring arrangement between itself and its franchisees in which the latter agreed not to recruit or hire each other’s or Pizza Hut corporate’s management employees. The 30-page lawsuit claims the Plano-headquartered company’s conduct reflects “a naked restraint of competition and a per se violation” of federal antitrust laws.

The plaintiff claims as a way to maintain its position as the largest pizza company in the world, Pizza Hut—with more than 16,000 locations around the world, more than 95 percent of which are independently owned and operated—colluded with its franchisees to suppress the wages of restaurant-based management workers across the United States. As to the specifics of the supposed no-solicitation, no-hire deal, the lawsuit says Pizza Hut’s franchise agreements stipulate “neither [Pizza Hut LLC] nor Franchisee may employ, directly or indirectly, any individual in a managerial position who is at the time, or was at any time during the prior six months, employed in a managerial position by the other party, nor may Franchisee employ, directly or indirectly, any individual in a managerial position, who is or was at any time during the prior six months employed in a managerial position by any other franchisee” without written consent.

The lawsuit argues the no-hire arrangement between Pizza Hut corporate and its franchisees not only harms employee mobility, but artificially raises employers’ power in the market while harming workers’ negotiating power within the pizza chains.

“This is especially harmful to management employees of Pizza Hut and its franchises as those employees are usually paid below a living wage,” the complaint reads, “and their marketable skills acquired through their work at Pizza Hut primarily have value only to other Pizza Hut restaurants and do not transfer to other fast food restaurants or similar businesses.”