By Jeffrey May, J.D.
Washington AG says that monetary penalty comes after franchisor initially refused to cease use of no-poach clauses.
Sub sandwich franchisor Jersey Mike’s Franchise Systems, Inc. has agreed to pay $150,000 and to remove so-called "no-poach" provisions from all of its franchise contracts nationwide to settle a lawsuit brought by Washington State Attorney General Bob Ferguson. An assurance of discontinuance was filed in the superior court for King County (Washington v. Jersey Mike’s Franchise Systems, Inc., Case No. 18-2-25822-7 SEA).
The state contended that Jersey Mike’s included language in its franchise agreements that restricted a franchisee’s ability to solicit or hire workers from the franchisor or another franchisee of Jersey Mike’s. According to the state, these no-poach provisions constituted a conspiracy to restrain trade in violation of the state Consumer Protection Act. The franchisor did not admit to any wrongdoing; however, it did agree to pay the monetary penalty and to amend existing franchise agreements with more than 1,300 franchisees located throughout the United States. The provision will not be included in new or renewed agreements.
The state intends to use the $150,000 for recovery of the costs and attorney fees incurred in the matter, future monitoring and enforcement of the Consumer Protection Act.
Since 2018, the state has announced a number of settlements arising out of the use of these types of agreements. As of August 2019, the state has successfully worked to eliminate no-poach clauses at 67 companies nationwide with an estimated 136,000 locations, according to the announcement.
Attorneys: Rahul Rao and Eric S. Newman, Assistant Attorneys General Antitrust Division for the State of Washington. John R. Potter (Heurlin, Potter, Jahn, Leatham, Holtmann & Stoker, P.S.) and Fredric A. Cohen and Aaron-Michael Sapp (Cheng Cohen LLC) for Jersey Mike's Franchise Systems, Inc. Howard E. Bundy (Bundy Law Firm, PLLC) for The Franchisees.
Companies: Jersey Mike’s Franchise Systems, Inc.
MainStory: TopStory FranchisingDistribution Antitrust WashingtonNews StateUnfairTradePractices
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