In a significant development, the Seventh Circuit Court has reversed a judgment in favor of McDonald’s, breathing new life into a potential employee class action case. The case centers on allegations that the anti-poaching provision, previously part of McDonald’s franchise agreements, is in violation of the Sherman Act (JD Supra).
This lawsuit hinges on what has turned out to be a pivotal case of first impression. It has attracted amicus contribution from heavyweight institutions such as the Department of Justice, the Federal Trade Commission, and the International Franchise Association. The reversal by the Seventh Circuit means that McDonald’s will once again have to defend itself against the allegations brought forth in the class action.
The complaint alleges that the anti-poaching provision in McDonald’s franchise agreements, which restricts franchisees from hiring employees of other McDonald’s franchises, is in direct violation of the Sherman Act. The Sherman Act prohibits any contract, combination, or conspiracy in restraint of trade. As such, central to this case is the interpretation of these anti-competitive practices as outlined in the Act.
The decision by the Seventh Circuit to reverse the earlier judgment in favor of McDonald’s suggests a growing acknowledgement of the potential for violation of antitrust laws in franchising arrangements.
This ruling illustrates the increased scrutiny on franchising agreements and their potential anti-competitive aspects. Corporate legal teams, particularly those overseeing franchising agreements, need to take cognizance of this development and assess their potential vulnerabilities under antitrust laws.