First AG lawsuit against company no-poach clause ends with $150K payment

Jersey Mike’s had the contract provisions in place until April 2018.

Jersey Mike’s, a company with King County franchises, has agreed to pay $150,000 to resolve a lawsuit over its use of no-poach provisions in contracts.

Washington Attorney General Bob Ferguson made the announcement on Aug. 23 and the agreement to settle the claims against all defendants was set to be approved at a hearing on Sept. 3, after the Reporter’s deadline, according to court documents.

There are 40 Jersey Mike franchises in Washington, and one planned for Edmonds. The restaurants are all independently owned.

As part of the agreement, the company will not add anti-poaching provisions to new contracts and remove them from their agreements around the country. These contracts prohibit companies from hiring or seeking to employ workers at other franchises, eliminating competition.

It’s these no-poach provisions that harm workers, Ferguson asserted in his reasoning. And restricting this competition in the labor market violates the state Consumer Protection Act.

In January 2018, Ferguson’s antitrust division launched an investigation into no-poach clauses and found that Jersey Mike’s used no-poach language in contracts at its Washington locations and about 1,343 locations nationwide.

Last year, the attorney general offered Jersey Mike’s — along with other businesses — the opportunity to sign a legally binding agreement to stop using no-poach provisions. In exchange, they would face no monetary penalty. Sixty-six corporate chains took Ferguson up on his offer. Jersey Mike’s did not.

Ferguson, in response, filed a lawsuit against the company. It was the first lawsuit any state attorney general brought against a corporation over use of no-poach clauses in franchise agreements. And although the company began to remove the clauses shortly after the lawsuit was announced, Ferguson could still seek penalties for prior unlawful conduct.

The $150,000 in funds paid by Jersey Mike’s will be used for the recovery costs of attorneys’ fees and for future enforcement and monitoring of the Consumer Protection Act.

Jersey Mike’s did not respond to requests for comment by the time of publication.

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