Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Thursday, April 8, 2021

No-Hire Provisions in McDonald's Franchise Agreements, an Antitrust Violations or Evidence of Joint Employer?

No-Hire Provisions in McDonald's Franchise Agreements, an Antitrust Violations or Evidence of Joint Employer?

 

Andrele Brutus St. Val

University of Pittsburgh - School of Law

Abstract

As the archetypical franchisor and industry leader, McDonald’s has come under much public and legal scrutiny in recent years for its business practices and its effects on low-wage and unskilled employees. Its no hire provision—which is a term included in its franchise agreements with franchisees that bars franchisees from hiring each others employees—has been found by economist to suppress wages and stagnate growth. This provision is being challenged under antitrust law while its employment practices are being disputed under labor law. McDonald’s is defending its business practices by presenting two seemingly contradictory defenses. This article explores how McDonald’s position in antitrust litigation over the use of no-hire agreements is inconsistent and arguably antithetical to its position in labor cases concerning joint-employer liability for the conduct of its franchisees thus allowing it to have its proverbial cake (or fries) and eat it too.

Viewing McDonald’s position in both cases through one lens, it is apparent that it is using its franchise agreements to set forth and control franchisee employment practices—and in the antitrust case it is advocating that it has the absolute right to do so as an intrabrand-franchise system with its franchisees —while disavowing any liability as a joint-employer for labor and employment violations. As a result of this dual and conflicting position, McDonald’s is able to reap the benefits of exercising control while avoiding the liability that results when its franchisees comply with the parameters it sets forth. This Article posits that in determining liability as a joint-employer, courts should also factor in McDonald’s intrabrand argument, which entails a concession that it exercises control over the franchisee’s employment and personnel matters—mainly hiring. This Article asserts that it is vital that courts analyze the terms of McDonald’s franchise agreements with the understanding that it desires to engage in coordination. After all, no one—not even fast food giant McDonald’s—should have their cake (or fries or Big Mac?) and eat it too.

https://lawprofessors.typepad.com/antitrustprof_blog/2021/04/no-hire-provisions-in-mcdonalds-franchise-agreements-an-antitrust-violations-or-evidence-of-joint-em.html

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