Class Action Lawsuit Filed Over Alleged McDonald’s No Poach-No Hire Policy Among Franchises

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McDonald’s once again finds itself as the defendant in a proposed class action lawsuit centered on allegations of a “conspiracy” among its franchises to neither recruit nor hire each other’s employees, which has caused proposed class members to experience depressed wages and diminished opportunities.

The latest in an ongoing stream of “no poach-no hire” antitrust suits, the case out of Illinois hinges on defendants McDonald’s USA and McDonald’s Corporation’s orchestration and enforcement of an alleged contractual agreement among its franchisees that the plaintiff argues constitutes “a naked horizontal restraint of competition.” According to the lawsuit, the agreement in place for independently owned and operated McDonald’s restaurants prevents the businesses from hiring or soliciting each other’s employees via an explicit clause that prohibits franchisees from “employ[ing] or seek[ing] to employ any person” who at the time is or within the preceding six months was employed by any McDonald’s franchisee or subsidiary. McDonald’s, the 38-page suit alleges, has thereby colluded to suppress the wages of employees working in its franchised restaurants nationwide. 

Alleging violations of the Sherman Antitrust Act, the case goes on to mention that collusion among employers to refrain from hiring or soliciting each other’s workers both gives employers heightened leverage and diminishes worker bargaining power within a chain of franchises. This scenario is especially harmful to McDonald’s workers, who the lawsuit says are typically paid below a living wage and have skills that have “value only to other McDonald’s restaurants.”

Notably, the lawsuit points out that McDonald’s removed the no-hire and no-solicitation provision from its standard franchise agreement sometime in 2017, and the provision is reportedly no longer a part of the restaurant’s standard franchise agreement. At the beginning of 2017, however, McDonald’s had more than 13,000 restaurants operating under the old franchise agreement that still contained the no-solicitation and no-hire provision. None of these franchises executed the new franchise agreement issued in 2017, the case claims.

“Any new provisions of the 2017 standard franchise agreement (including the absence of the express no-hire and no-solicitation provision) do not govern McDonald’s contractual franchise relationship with existing franchisees,” the complaint states. “Those franchisees are governed by the franchise agreements that they previously executed with McDonald’s, typically with 20-year terms. Execution of a new franchise agreement typically requires the franchisee to pay a new franchise fee (currently $45,000) for a new term, if approved by McDonald’s.”

The suit proposes to cover a class current and former McDonald’s employees and managers nationwide regardless of whether a restaurant was or is operated by McDonald’s itself or by a franchisee.