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McDonald’s no-poaching policy survives court challenge

The judge found employees failed to show the policy restricting franchises from hiring employees of another franchise had an anticompetitive effect on the area labor market.

CHICAGO (CN) — A federal judge granted summary judgment Tuesday in favor of McDonald’s in a long-running legal battle with employees over a no-poaching provision in its franchise agreements.

In his 13-page order, U.S. District Judge Jorge Alonso found that the case had to be decided under the rule of reason, meaning the plaintiffs carry the burden of showing that an agreement or contract has an anticompetitive effect on a given market within a given geographic area.

The Obama-appointed judge rejected the employees' argument that "employment by McDonald’s restaurants constitutes a market all its own, separate from the market for employment by other quick-serve restaurants."

"Plaintiffs could have sold their labor to other customers," Alonso wrote.

Attorneys from both sides did not immediately respond to an email seeking comment.

Lead plaintiff Leinani Deslandes filed a class action lawsuit against the fast-food giant in 2017 challenging its no-poaching policy that prohibits employees from moving from franchise to franchise within the corporation for a period of six months unless released by their original franchise.

Deslandes claimed that the policy restricts wage competition and suppresses employees’ pay. Plaintiff Stephanie Turner filed a related lawsuit that was eventually consolidated with Deslandes’ complaint.

The court denied Deslandes’ request for class certification, finding that individual issues would predominate. That ruling meant each plaintiff would need to establish that the restraint was anticompetitive in the relevant market in which she sold her labor.

After the class certification was denied, Deslandes and Turner each sought relief under the Sherman Act for reduced wages due to the no-hire restriction.

“As defendants point out, neither Deslandes nor Turner ever included in her respective complaint a plausible claim under the rule of reason, which is to say neither ever alleged a relevant market within which defendants have market power to suppress wages,” Alonso wrote.

The judge noted that there were between 42 and 50 fast-food restaurants within 3 miles and 517 within a 10-mile radius of Deslandes’ house. Similarly, he noted there were 253 quick-service joints within 10 miles of Turner’s house.

“Specifically, neither Deslandes nor Turner alleged in her respective complaint the relevant market in which she sold her labor or that McDonald’s had market power in that relevant market,” Alonso wrote. “Such allegations are necessary to state a plausible claim that a restraint is unlawful under the rule of reason.”

Alonso also dismissed their request to file an amended argument.

“It is far too late for that,” he wrote. “On June 25, 2018 this Court explicitly gave plaintiff Deslandes an opportunity to file an amended complaint in order to add allegations that defendants had market power in the relevant market. The Court set a deadline of July 23, 2018, for the amendment. Deslandes did not file an amended complaint, and, thus, as this Court has mentioned in multiple orders, plaintiff waived the chance to add those allegations.”

The federal judge also dismissed a claim that Turner was not given a deadline to file an amended complaint, finding that when Turner chose to consolidate her case with Deslandes, she specifically stated that she was asserting the same claims as Deslandes.

“It is far too late in this case, after discovery has closed, for either plaintiff to add allegations of market power in the relevant market,” Alonso wrote. “Plaintiffs have not shown good cause for this Court to relieve them of a strategy they chose years ago. Their neglect to amend in 2018 is not excusable.”

Alonso also found that an amended complaint would be futile given the vast number of other fast-food options near the plaintiffs’ homes, which undermines their argument that McDonald’s had market power to suppress their wages.

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