It’s a Brave New World for Employment Agreement Poaching Clauses

“No more.”

That is the succinct and studied observation delivered in an in-depth media overview of what are commonly called “anti-poaching” clauses that franchisors routinely insert into their employment contracts.

That probe into what has now become a front-burner legal concern concedes that, while no-poach provisions have been ubiquitous and quietly accepted across the country for years, they are now confronting strong headwinds.

The reasons why seem clear enough. Criticism starts with the public’s widely growing view that contractual restrictions disallowing franchisees from hiring employees from a franchisor or other franchisee are patently unfair. Companies that continue to feature them suffer an ever-higher risk of litigation embroilment grounded in claims of antitrust violations spotlighting hampered worker mobility and suppressed pay.

Commentators duly note that the penalties for an antitrust finding in a poaching scenario can be dire, indeed. Recent federal guidance points to both criminal and civil sanctions that can be levied in an anti-poaching antitrust case.

And then there is this: Would-be federal legislation currently under review seeks to flatly forbid anti-poaching language in all franchise contracts.

The writing seems to be not just firmly on the proverbial wall for anti-poaching agreements, but emblazoned in upper case as well. Multiple class-action lawsuits are now in the works against big-name franchisors (e.g., McDonald’s and Pizza Hut), with such filings likely to proliferate in the future. The above primer notes the risk “of huge potential class sizes [and] treble damages” for franchisors defending against such litigation.

We will keep a close eye on this important and topical subject matter for readers of our business law blog.