By Barbara Grzincic
(Reuters) - A federal appeals court has revived a potential class action against Burger King over its prior use of a “no-hire” clause that blocked all franchisees from hiring each other’s employees.
The 11th U.S. Circuit Court of Appeals Wednesday reversed a ruling by a district court judge in Miami, who dismissed the workers’ claims that the no-hire clause was an unlawful conspiracy to suppress wages and employee turnover.
The 11th Circuit said the judge erred in finding that Miami-based Burger King Worldwide, its parent companies, and its franchisees had all operated as a “single economic enterprise” that was categorically incapable of conspiring with itself.
“(T)here’s just no question that Burger King and its franchisees compete against each other and have separate and different economic interests,” and that, “in the absence of the No-Hire Agreement,” each franchised restaurant “would pursue its own economic interests and therefore potentially and fully make its own hiring decisions, including about wages, hours, and positions,” Circuit Judge Robin Rosenbaum wrote for the panel.
“They might even attempt to entice stand-out employees to leave one restaurant and join their own. But the No-Hire Agreement removes that ability,” Rosenbaum wrote, joined by Circuit Judge Charles Wilson and Senior Circuit Judge Frank Mays Hull.
Dean Harvey of Lieff Cabraser Heimann & Bernstein, lead counsel for Jarvis Arrington, Sandra Munster and Geneva Blanchard, declined to comment on the pending litigation. The workers’ appeal drew amicus support from the U.S. Justice Department.
Burger King and its attorneys did not immediately respond to requests for comment.
The lawsuit was one of many filed by fast-food workers since 2016, when the U.S. Justice Department and the Washington state attorney general began targeting the industry's ubiquitous use of no-hire or “no-poach” agreements.
Burger King dropped the no-hire clause from its franchise agreements in 2018 as part of a settlement with the Washington attorney general. Several other fast-food chains did the same.
In lawsuits by pre-2018 workers, however, the chains have argued that there was no conspiracy or, in the alternative, that any restraint of trade was not unreasonable.
The judge in the Burger King case found it unnecessary to consider the latter argument, but Burger King urged the 11th Circuit to uphold the dismissal on that ground anyway. The International Franchise Association and the Florida Chamber of Commerce agreed in separate amicus briefs.
The panel declined, saying “those inquiries are best left to the district court” on remand.
The case is Arrington, et al. v. Burger King Worldwide Inc., Burger King Corp., and Restaurant Brands International (NYSE:QSR) Inc., 11th U.S. Circuit Court of Appeals, No. 20-13561.
For Arrington et al.: Dean Harvey of Lieff Cabraser Heimann & Bernstein, Yaman Salahi formerly of Lieff Cabraser, and Derek Brandt of McCune Wright Arevalo
For Burger King: Stuart Singer of Boies Schiller & Flexner; Luis Suarez of Heise Suarez Melville