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H&R Block Anticompetitive No-Poach Agreements Class Action

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Fast food outlets apparently aren’t the only businesses that put no-poach provisions into their franchise agreements. The complaint for this class action brings this antitrust case claiming that H&R Block, Inc. and H&R Block Tax Services, LLC also engaged in this anticompetitive practice.

The class for this action is all tax professionals and managers who worked at an H&R Block in the US, whether owned by the company or its franchisees, during any time between January 1, 2009 and May 10, 2018.

Among its 10,000 offices throughout the US, H&R Block has more than 3,300 franchised units as well as corporate-owned offices. The complaint alleges that the various offices are considered to be in competition with each other rather than branches of a single company. It quotes the company’s standard franchise agreement as saying that franchisees are not “a joint venturer, joint employer, partner, agent, fiduciary, or employee” of H&R Block. 

H&R Block’s Franchise Disclosure Document (FDD) states that franchisees are expected to operate within a defined “Franchise Territory” but that they do not “receive an exclusive Franchise Territory.” In fact, franchisees may “face competition from other offices” that are owned by H&R Block or its other franchisees.

Franchises are supposed to make their own decisions about the hiring and management of employees. Even so, H&R Block and its franchisees agreed not to compete with each other in the hiring of employees, at least up until May 2018. The complaint quotes the franchise license agreement as saying, “During the term of this Agreement, neither Franchisee nor any of Franchisee’s associates will, without H&R Block’s prior written consent … [s]olicit for employment any person who is employed by H&R Block or by any other franchisee of H&R Block.”

The complaint claims that the ultimate purpose is to restrict competition for employees in the market and to artificially suppress wages (and, one assumes, mobility) for employees in a highly-specialized job. As a demonstration of this, the complaint displays a chart of the H&R Block average salary for certain positions as compared to the national average salary for the same position, and the percentage below the national average of the H&R Block salary. For example, the average salary for a Block Tax Analyst is 30,659, 47% below the national average for the position of $57,747.

Eleven state attorney generals have been looking into no-poach agreements among franchisees. In 2018, they sent out letters to fast food franchisors about no-poach clauses in franchise agreements. Shortly thereafter, H&R Block claimed to have ended its practice of including and enforcing such clauses in its own franchise agreements. However, employees such as the plaintiff in this case have still been harmed by years of this anticompetitive behavior.

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