The United States District Court for the Southern District
of Florida erred when it dismissed a suit against a group of Burger King
franchisees that alleged the restaurants illegally maintained no-hire and no-poach
agreements. The workers claimed Burger King’s franchisee agreements prevented
them from obtaining employment at other franchise restaurants. See Arrington
v. Burger King Worldwide, Inc., 448 F.Supp.3d 1322, 1326 (S.D. Fla., 2020).
From 2010-2018, franchisees joining the Miami Burger King
system were required to execute a standard franchise agreement. The agreement stated
that “Neither [Burger King] nor Franchisee will attempt, directly or indirectly,
to entice or induce… any employee of the other … to leave such employment or
employ such employee within six (6) months after his or her termination.” Id. at 1326, 1327.
The workers alleged the agreement resulted in depressed
wages, decreased benefits, and reduced job flexibility for previous and current
Burger King employees. They also alleged the agreements were an unreasonable restraint
on trade, in violation of the Sherman Antitrust Act of 1890. The District
Court found Burger King unable to violate the Sherman Act, citing that each
of its franchisees constituted a single economic enterprise which was unable to
participate in a concerted activity.
The Eleventh Circuit reversed the lower court’s decision,
comparing the network of Burger King franchisees to the National Football
League (“NFL”), which faced a similar suit. In comparison, the Eleventh Circuit
said, “Like the 32 [NFL] teams … Burger King and its separate and independent franchise restaurants compete against each
other — in this case, for employees”. Arrington v. Burger King Worldwide,
Inc., 47 F.4th 1247, 1250 (11th Cir. 2022).
The Court stated the workers’ complaint against Burger King “plausibly
alleged” that the no-hire agreement qualified as concerted activity under the Sherman
Act, particularly because “each franchisee [was] an independent center of
decision making as to hiring or employment agreements.” Id. at 1255, 1256.
The Eleventh Circuit remanded the case to the District Court for further proceedings. Although the Eleventh Circuit declined to decide whether the agreement was an illegal restraint of trade, it signals uncertainty in this area. Franchisees should carefully scrutinize their franchise agreements to ensure the no-hire clauses are narrowly tailored and not a restraint on trade, given that other franchisees will not likely be considered part of one single enterprise.
