US Appeals Court Revives Claims Of ‘No-Poaching’ Agreements Against McDonald’s

The 7th US Circuit Court of Appeals in Chicago has resurrected allegations against McDonald’s Corp, accusing the fast-food giant of violating federal antitrust laws. The case revolves around McDonald’s alleged imposition of “no-poaching” agreements among its franchisees, preventing them from hiring employees from each other’s establishments.

The appellate court’s decision, announced on Friday, overrules the dismissal of a proposed nationwide class action last year, asserting that the lower court judge failed to adequately scrutinize the controversial agreements. While the initial ruling justified the agreements as protective measures for franchisees’ investments in employee training, the 7th Circuit emphasized the need for a closer examination regarding the agreements’ nationwide scope and the duration of their enforcement.

Circuit Judge Frank Easterbrook underscored that simply observing the individual franchise contracts would not suffice to address pertinent questions about the broader implications of the “no-poaching” agreements. The court expressed the necessity for a deeper analysis, particularly regarding their nationwide applicability and the six-month duration post-employment.

Notably, the case originated from two former McDonald’s workers appealing a 2022 ruling by U.S. District Judge Jorge Alonso in Chicago, who dismissed claims alleging that the agreements stifled competition and suppressed wages. These agreements prohibited franchisees from hiring employees who had previously worked at other McDonald’s franchises or corporate stores anywhere in the United States for a six-month period after leaving their positions.

Related: McDonald’s Defeats No-Poach Antitrust Suit

While McDonald’s has maintained that it ceased imposing “no-poach” agreements on franchisees in 2017, the appellate ruling indicates a resounding legal challenge to the company’s practices. This development also echoes broader shifts within the fast-food industry, with several major players discontinuing similar agreements in response to state investigations.

The plaintiffs in the case received significant support from the Biden administration and Democratic attorneys general representing 20 states and Washington, D.C. These entities argued in court briefs that McDonald’s agreements unlawfully suppressed workers’ wages, underscoring the broader implications of the case on labor practices and competition within the fast-food sector.

Furthermore, the 7th Circuit’s decision also prompts a reconsideration of the lower court’s ruling to decline certification of a nationwide class in the lawsuit. McDonald’s has estimated that such a class could potentially include millions of workers, further amplifying the stakes of the legal battle.

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