Poaching in the employment realm is the act of scouting, soliciting, recruiting, and hiring employees already employed by another entity. The consequence of having a key employee poached can be a great hardship on the business, and it can create hard feelings between poacher and poached companies.
The rationale of anti-poaching clauses are to avoid discord among and promote harmony between franchisees. Anti-poaching clauses are common in franchise agreements. Often the anti-poaching clause is cushioned within the non-solicitation provision. A non-solicitation clause goes something like this:
You covenant that you will not, during the Term and for a period of one year after expiration or termination of the Franchise, employ or seek to employ any person who is employed by us, our Affiliates or by any of our franchisees, or otherwise directly or indirectly solicit, entice or induce any such person to leave their employmentGreer v. Papa John’s, S.D.N.Y., Case No. 1:18-cv-11312, December 4, 2018
The non-solicitation clause prohibits the franchisees from during and post the term of the franchise agreement from deriving Franchised Business customers and employees from another.
Recent claims by employees are claims are challenging the premise the rationale of anti-poaching clauses is to promote harmony and avoid discord amount franchisees. In two recent cases involving Papa Johns[i] and Jiffy Lube[ii], employees are asserting that anti-poaching clauses unfairly suppress competition and suppress wages.
Employees are to the only one to challenge anti-poaching
provisions in franchise agreements. The
Papa Johns’ employee class action case, follows a settlement between Papa Johns
and the Washington Attorney General, in which the Washington Attorney General
asserted the Papa Johns’ anti-poaching clause
restricts worker mobility and decrease[s] competition for labor by preventing workers from moving among the chain’s franchise locations
Papa Johns’ settled with the Washington Attorney General, and as part of the settlement, Papa Johns agreed to remove the anti-poaching clause from its franchise agreement.
Does your franchise agreement include an anti-poaching provision? What can you do? What should you do? How can you preeminent any potential governmental or employee claims?
[i] Greer v. Papa John’s, S.D.N.Y., Case No. 1:18-cv-11312, December 4, 2018
[ii] Fuentes v. Royal Dutch Shell PLC, E.D. Pa., Case No. 2:18-cv-05174-AB, November 29, 2018 priority52