Franchisees may find themselves limited in their ability to find talented personnel due to “No-Poach” provisions. Additionally, without legal guidance, franchisees may find themselves in breach of their franchise agreements, and subject to potential litigation as a result. Hirzel Dreyfuss & Dempsey can help franchisees navigate the dangers associated with franchise agreement “No-Poach” provisions.
As a general matter, agreements between franchisors and franchisees are typically subject to the rule of reason because they can be viewed as vertical restraints that may produce procompetitive benefits. For example, restrictions in franchise agreements on the items franchisees can sell, where they can sell it, and how they can advertise ensure that franchisees are selling a uniform product and enhancing a unified brand, which encourages interbrand competition. Because franchise no-poach agreements raise questions about competition for labor – rather than competition for consumers – the proper way to characterize the nature of labor-market restraints within a franchise business are relatively uncharted territories of antitrust law.