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Debate over ‘No Hire Agreements’ grows as two more companies sued

By Stephanie K. Mann, J.D.

As the national debate over whether “no-poach” agreements constitute anticompetitive behavior continues to grow, two more companies have been sued by their employees for violations of the Sherman Act. Nationwide pizza chain Papa John’s and automobile repair shop Jiffy Lube were sued for violations of the Sherman Act and Clayton Act for instituting anti-competitive agreements into their franchise agreements in an effort to lower labor costs and thereby unfairly restrict employees.

Papa John’s. In the first complaint, an employee of Papa John’s International, Inc., a nationwide pizza restaurant with more than 700 locations and 22,400 employees, alleged that starting in 2008, the restaurant and its franchisees sought to reduce its labor costs by entering into an agreement not to compete for individuals employed by other Papa John’s restaurants. The employee first learned about this No Hire Agreement as a result of an investigation initiated by the Washington Attorney General’s Office to determine whether the agreement restrained competition in the labor market.

In July 2018, the Washington AG concluded that the No Hire Agreement constitutes an agreement in restraint of trade that “restricts worker mobility and decrease[s] competition for labor by preventing workers from moving among the chain[]’s franchise locations” and that the agreement artificially reduced employee compensation by putting a downward pressure on wages. As a result of these findings, the Washington AG and Papa John’s entered into a consent order that requires the pizza restaurant to remove the No Hire Agreements from its franchise agreements.

The class representative in the current case was employed by a Papa John’s restaurant in 2017 but applied for a position at a different location which would afford her greater hours and an increase in compensation. She was told that while she was well-qualified, she could not be hired. Though no explanation was given at the time, the complaint alleges that it was due to the No Hire Agreement that the employee incurred monetary losses and an antitrust injury.

The class action suit alleges that all employees of Papa John’s from 2008 to the present were harmed due to a reduction in wages, a denial of the opportunity to fairly compete for increased compensation and other desirable benefits by applying to another Papa John’s store, and a denial of an increase in compensation and employment benefits from their current employer that would have otherwise been necessary to retain the employee, but for the No Hire Agreement. The complaint seeks damages, an injunction, and disgorgement of all “ill-gotten gains.”

Jiffy Lube. In the second complaint, an employee of Jiffy Lube, a nationwide chain of light automobile repair services with more than 2,000 shops, alleged that as part of its standard franchise agreement, Jiffy Lube franchisees are prevented from hiring anyone that has worked at another Jiffy Lube location within the past six months in an anticompetitive manner in an attempt to reduce worker wages.

The class representative began his employment with Jiffy Lube at a shop in Pennsylvania in 2015. In 2016, he sought a transfer to a shop in Florida so that he could be closer to his family, but he was told that this was an impossibility because the shop was owned by a different franchisee. He went to Florida and found odd jobs, but was unable to find gainful employment. After the six-month “no poach” period was up, he was hired by a Jiffy Lube in Florida. In December 2017, he moved back to Pennsylvania, but because of the no-poach agreement, he again was unable to transfer his employment. The complaint alleges that the no-poach agreement suppressed his wages, inhibited his employment mobility, and lessened his professional work opportunities.

The class action suit alleges that Jiffy Lube engaged in predatory and anti-competitive behavior by orchestrating an agreement to restrict competition among Jiffy Lube shop owners, which unfairly suppressed employee wages, unreasonably restrained trade, and restrained employees’ ability to secure better compensation, advancement, benefits, and working conditions in violation of the Sherman Act. The complaint seeks monetary damages as well as an injunction against any use of a no-poach agreement.

Greer v. Papa John’s was filed in the Southern District of New York; the case is No. 1:18-cv-11312. Fuentes v. Royal Dutch Shell PLC was brought in the Eastern District of Pennsylvania; the case is No. 2:18-cv-05174-AB.