Franchise No-Poach Clauses: From Boilerplate to Antitrust Target

You already know your franchise agreement has language governing how employees move between locations. What you probably don't know is that this clause, sitting quietly in the general provisions section, is now the subject of state investigations, class action settlements, and a live split among federal courts over whether it's even legal.

A franchise no-poach clause (also written as a no-hire or employee non-solicitation provision) prohibits one franchisee in a system from recruiting, interviewing, or hiring an employee who currently works, or recently worked, at another location in the same brand. It usually sits next to insurance requirements and dispute resolution language, and for most of franchising's modern history nobody thought to question it. That changed in 2018, when a single state investigation started unwinding it nationwide.

What a franchise no-poach clause actually restricts

The restriction runs system-wide, not just within one franchisee's own units. A shift lead at a quick-service location who wants a promotion at a location two miles away, owned by a different franchisee under the same brand, can be blocked from taking that job even though the two franchisees compete for nothing but labor. Most versions extend six to twelve months past an employee's last day, and the enforcement mechanism points at the franchisee, not the worker: hire a competitor's crew member from inside the same system and you risk a default notice, not a lawsuit from your neighbor.

Why the clause spread to more than half of major franchise contracts

Economists Alan Krueger and Orley Ashenfelter reviewed 2016 franchise agreements from 156 of the largest U.S. chains and found no-poaching language in 58 percent of them, including McDonald's, Burger King, Jiffy Lube, and H&R Block. The clause concentrated in low-wage, high-turnover sectors, the same sectors where franchisors argued they needed protection against one location skimming another's trained staff. That justification made sense to franchise attorneys drafting boilerplate in the 2000s and early 2010s. It stopped making sense to regulators the moment someone modeled what the clause does to wages when it's standard across an entire industry instead of one company.

How one state attorney general unwound it nationwide

Washington's attorney general opened an investigation into franchise no-poach clauses in January 2018. Within seven months, the office had secured binding agreements from seven fast-food franchisors to stop enforcing the clause and strip it from every agreement nationwide, not just in Washington. The initiative kept going. By the time it wrapped, 237 corporate franchise chains, including McDonald's and Jiffy Lube, had signed Assurances of Discontinuance covering close to 200,000 locations across the country. None of those 237 agreements required a court to first rule the clause illegal. Franchisors gave it up because fighting to keep it had become more expensive than whatever training-investment protection it was ever supposed to provide.

Why courts still disagree on whether it's even illegal

The legal theory against the clause is straightforward: a horizontal agreement not to compete for workers is the kind of restraint courts have historically treated as automatically illegal, without needing to prove actual harm case by case. The defense franchisors lean on is just as established. Under the Copperweld single-entity doctrine, a franchisor and its franchisees can be treated as one economic actor rather than separate competitors, and a single actor can't conspire with itself under Section 1 of the Sherman Act. The Ninth Circuit applied that logic to bar a no-poach claim against the Jack in the Box franchisor. The Eleventh Circuit went the other way, holding that a franchisor and its franchisees can violate the Sherman Act through a no-hire agreement because they remain economically independent businesses with separate interests, common ownership of the brand notwithstanding. That split means the identical clause, in the identical form, is a settled antitrust violation in one circuit and legally untouchable in another, and which one applies depends on where the lawsuit gets filed.

What the current wave of litigation is costing franchisors

Papa John's received preliminary approval in August 2025 for a five million dollar class action settlement covering roughly 520,000 current and former employees, with a final approval hearing set for May 2026. The suit alleged that non-solicitation language in Papa John's franchise agreements suppressed wages by blocking movement between locations. Separately, in February 2025, New Jersey Attorney General Matthew Platkin led a coalition of eighteen states and the District of Columbia in filing an amicus brief in ongoing litigation against Jackson Hewitt, arguing the tax-prep chain's no-poach provisions should be treated as presumptively unlawful. State regulators have moved from negotiating discontinuance agreements one franchisor at a time to intervening directly in private litigation to push courts toward per se treatment nationally.

What to do with the clause sitting in your franchise agreement right now

Pull the current agreement and the personnel or general provisions sections of the FDD and search for non-solicitation, no-hire, or no-poach language that applies between your own franchisees. If it's there, don't wait for a demand letter or a state AG inquiry to force the review. Antitrust counsel can tell you where the clause sits relative to the circuit split in the states where you have units, and whether it's defensible enough to keep or vulnerable enough to strike at the next agreement amendment. Revscale's franchise intelligence tools flag legacy clauses like this automatically when they ingest a franchisor's agreement library across a brand's full location footprint, but the first pass doesn't require software: read the paragraph today. The Washington AG got 237 franchisors to abandon this franchise no-poach clause without a single adverse court ruling forcing their hand. That's the actual signal here, not the circuit split. Franchisors confident they'd win still decided the fight wasn't worth having.