Pizza Hut Manager Says No-Poaching Agreements Violate Antitrust Laws

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A Pizza Hut manager from Pennsylvania says the no-poaching provisions in the company’s franchise agreements violate federal and state antitrust laws.

According to plaintiff Kristen Ion, the franchise agreements between defendant Pizza Hut LLC and its franchisees unlawfully cripples the careers of Pizza Hut managers. She says these agreements are anticompetitive behavior that saves the companies money at their managers’ expense.

Under the agreements in question, Pizza Hut and its franchisees agree not to hire away each others’ management employees. The agreements say that neither Pizza Hut nor its franchisees may fill their managerial positions with any person who worked as a Pizza Hut manager within the past six months, unless the prior employer consents to the new employment in writing.

This agreement ostensibly prevents Pizza Hut and its franchisees from competing with each other for managerial talent. But it does so at an unacceptable cost to the managers themselves, according to Ion’s Pizza Hut class action lawsuit.

Ion argues this no-poaching agreement unfairly hamstrings Pizza Hut managers’ ability to market themselves as a potential employee. She says she and other managers like her miss out on opportunities for professional advancement because of these Pizza Hut no-poaching agreements. Their training in Pizza Hut management is specific to the Pizza Hut system of restaurants, she says, so there isn’t much market for it outside that system.

She also says that by suppressing competition for Pizza Hut managers, the company and its franchisees drive managers’ compensation down. After more than two and a half years of working for Pizza Hut franchisee Aurora Huts LLC, Ion’s wage has risen only to $10 per hour. She says it got that high only after she threatened to quit and put in her notice.

No-poaching agreements are not uncommon between franchisors and franchisees. Neither are they clearly legal.

Ion quotes guidance from the Federal Trade Commission and the Department of Justice Antitrust Division that says “[n]aked wage-fixing or no-poaching agreements among employers, whether entered into directly or through a third party intermediary, are per se illegal under the antitrust laws.”

These laws prohibit anticompetitive behavior even among firms that, like Pizza Hut and its franchisees, make the same products or offer the same services, the guidance says.

Ion seeks to represent a plaintiff Class that would cover all U.S. persons who are current or former managers at all Pizza Hut restaurants, both franchise and company stores. She also proposes a subclass of only Pennsylvania Class Members

She seeks a court injunction barring Pizza Hut from enforcing existing no-poaching agreements and from entering into new ones. She is asking for an award of damages including treble damages under federal and state antitrust laws, plus court costs, attorney fees, and any other relief the court deems appropriate.

Ion is represented by attorneys Bruce W. Steckler and L. Kirstine Rogers of Steckler Gresham Cochran PLLC, Richard D. McCune and Michele M. Vercoski of McCune Wright Arevelo LLP, and Derek Y. Brandt.

The Pizza Hut Managers Antitrust Class Action Lawsuit is Ion v. Pizza Hut LLC, Case No. 4:17-cv-00788, in the U.S. District Court for the Eastern District of Texas.