On August 25, 2023, the Seventh Circuit Court of Appeals changed the rules of the game with the ruling on Deslandes v. McDonald’s. The case, which initially was dismissed by a district court, questioned the legality of no-hire and non-solicitation clauses included in McDonald’s franchise agreements. The full details of the case can be found here.
The court decided to vacate and remand the original court’s dismissal. It was noted that there was a lack of sufficient analysis on whether the per se rule could be applied in this situation. Furthermore, the court believed that the clauses in question did not necessarily imply a procompetitive arrangement.
This decision has the potential to increase the risk for companies using no-hire and non-solicitation clauses in their contracts. The Seventh Circuit Court of Appeals’ interpretation raises questions on the extent to which such clauses can be included in agreements without attracting antitrust scrutiny.
In essence, the case serves as a reminder for legal professionals to be precise in the drafting and implementation of no-hire and non-solicitation clauses in order to adhere to antitrust laws. Detailed provisions need to be implemented ensuring that such clauses do not unduly limit competition and are directly related to the primary agreement. Future litigation involving these clauses will likely examine their necessity and proportionality in terms of the overall business agreement.
The legal community should keep a keen eye on developments arising from the Deslandes v. McDonald’s case. The decision will undoubtedly reverberate around the legal and business worlds, prompting a detailed analysis of existing contracts and possibly inspiring revisions or the removal of these clauses entirely, depending on each company’s inherent risks and business models.