Eleventh Circuit Revives Putative Class Action Against Burger King For Violation Of Federal Antitrust Laws Based On No-Poaching Provisions In Franchise Agreements

Published date15 November 2022
Subject MatterCorporate/Commercial Law, Antitrust/Competition Law, Litigation, Mediation & Arbitration, Antitrust, EU Competition , Class Actions, Franchising
Law FirmBilzin Sumberg Baena Price & Axelrod LLP
AuthorMr Adrian K. Felix

Arrington v. Burger King Worldwide, Inc., No. 20-13561 (11th Cir. Aug. 31, 2022) - In October 2018,a former line cook of a Burger King franchise restaurant in Illinois, filed a class action complaint in the District Court for the Southern District of Florida against Burger King Worldwide and Burger King Corporation (collectively, "Burger King" or "BKC")1, for violation of Section 1 of the Sherman Act, 15 U.S.C. ' 1, based on Burger King's inclusion of an employee no-solicitation and no-hire provision (the "No-Poaching Clause") in its standard franchise agreement.

Specifically, the employee plaintiffs2 alleged in their complaint that every Burger King franchisee who entered into BKC's standard franchise agreement, between 2010 and September 13, 2018,3 was required to agree to the following provision:

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 employee.

According to the plaintiffs, the foregoing No-Poaching Clause gave Burger King and its franchisees the power to suppress restaurant employee wages and eliminate competition for labor between Burger King restaurants, by restricting employee mobility, and thus, limiting employee bargaining power to seek increased wages and improved working conditions.

The plaintiffs further asserted that Burger King restaurants, the significant majority of which are independently-owned and operated, are competitors in the labor market, as evidenced by the fact that, inter alia, BKC expressly informs franchisees that they are not granted exclusive territories, and may face competition from other franchised or company-owned Burger King restaurants or other distribution channels or brands owned by BKC that could affect customer trading patterns. The plaintiffs concluded, therefore, that the No-Poaching Clause was a naked restraint of trade and per se violation of federal antitrust laws, because it constituted a concerted action and undertaking between direct competitors that illegally eliminated the competition for restaurant labor between Burger King and its franchisees and amongst franchisees. The plaintiffs argued, in the alternative, that the BKC defendants are liable under a quick-look analysis, because the...

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