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McDonald’s Must Face No-Poach Claims

 |  April 29, 2020

McDonald’s 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.

According to Bloomberg Law, 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 US 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 (DOJ) 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.

Full Content: Bloomberg

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