A requirement at Burger King, 99% of whose restaurants are independent franchisees, that workers who leave one Burger King cannot go to work at another for at least six months without prior written consent violates federal antitrust law, a federal appeals court said Wednesday. by overturning a lower court decision.
Burger King, which is operated by Miami-based Restaurant Brands International, had franchisees sign these “no rent” agreements from at least 2010 until at least September 2018, according to the ruling by the 11th US Circuit Court of Appeals in Atlanta in Jarvis Arrington et al. v. Burger King Worldwide Inc.
At that point, new franchisees were no longer required to sign the agreement, but thousands of those already in business continued to operate under it, the ruling said.
The lawsuit was filed by former Burger King employees in the US District Court in Miami, which dismissed the case. When a three-judge appeals court overturned the lower court, it cited the federal Sherman Anti-Trust Act of 1890, which prohibits contracts that unreasonably restrain interstate commerce or foreign commerce.
“Plaintiffs alleged that by preventing them from obtaining employment at other Burger King franchise restaurants, the No-Hire Agreement caused them to be paid artificially reduced wages, suffered reduced benefits and were deprived of job mobility,” the ruling said.
“In Plaintiff’s view, the No-Hire Agreement constitutes an unreasonable restraint of trade,” in violation of the Sherman Act.
The Board of Appeal agreed. The no-employment agreement “deprives the marketplace of independent decision-making centers (on employment) and therefore of actual or potential competition,” the citation said. The United States Supreme Court’s 2010 unanimous ruling in American Needle Inc. v. National Football League, et alwhich held that National Football League Properties’ exclusive contract with Reebok International Ltd. violated the Sherman Act.
The case was remanded for further processing.
Attorneys in the case did not respond to requests for comment.