Papa John’s is the fourth-largest pizza company in the world, the complaint for this class action says. As such, the complaint alleges, its no-poach agreements are likely to have an anticompetitive effect on the labor market.
The class for this action is all persons in the US who are current or former employees at all Papa John’s restaurants.
Approximately 80% of the US restaurants for Papa John’s are franchises, independently owned and operated by parties who have signed a franchise agreement with Papa John’s. The complaint claims that Papa John’s and its franchises have conspired not to poach each other’s employees.
The complaint quotes the franchise agreement as saying, “You covenant that you will not … 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 employment.” According to the complaint, all franchisees up to at least November 2017 had to sign the agreement containing this provision.
That’s not all. The complaint alleges that franchisees agreed to “onerous remedies” if they violated the no-poach provisions. In fact, Papa John’s may terminate the franchise “without opportunity to cure” the poaching situation, and is entitled to “all damages, costs, and expenses, including reasonable attorneys’ fees” incurred in enforcing the agreement.
However, the Department of Justice (DOJ) Antitrust Division and Federal Trade Commission (FTC) have jointly put out an Antitrust Guidance for Human Resource Professionals that condemns such agreements: “Naked wage-fixing or no-poaching agreements among employers, whether entered into directly or through a third party intermediary, are per se illegal under the antitrust laws.”
The complaint expressly alleges, “The no-poach and no-hire agreement had and has the purpose of restricting competition for labor and had and has the intended and actual effect of fixing and suppressing compensation and restricting employment mobility.”
As wages have remained largely stagnant, the DOJ has pursued and resolved certain antitrust investigations. In 2010, for example, it settled with six high tech companies over their no-solicitation agreements for employees.
Other fast-food companies, such as Burger King, have also been sued by workers over no-poach agreements. This case has been brought by Jay Houston, a Papa John’s prep cook and driver in Colorado.
The complaint also alleges fraudulent concealment of the no-poach provisions and asks for tolling of the statutes of limitations.