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Jersey Mike’s settles ‘no-poaching’ lawsuit for $150K

Washington’s attorney general said the deal marks the 67th time a franchisor has agreed to drop a prohibition against intra-chain hiring.
Photograph: Shutterstock

Jersey Mike’s Subs has agreed to pay $150,000 to settle a lawsuit over its requirement that franchisees not recruit one another’s employees, Washington Attorney General Bob Ferguson has announced.

The deal also requires the sandwich chain to remove the so-called no-poaching clause from current contracts and eliminate the language from future pacts. The agreement extends to all franchise agreements drafted by the fast-growing chain, not just ones involving restaurants in Washington state.

No-poaching stipulations are commonly included in restaurant franchise contracts to prevent operators within a chain from bidding against one another for the services of an employee who has experience with the brand. Ferguson and other state attorneys general have blasted the practice as a way of holding down wages and denying workers their full value in the marketplace. Jersey Mike’s is believed to be the first restaurant chain to be sued for the practice.

Ferguson has been particularly aggressive in trying to eliminate the use of no-poaching provisions. His stated goal is to halt the use of the language on a national basis, and he claims that 66 chains had agreed before the Jersey Mike’s settlement to drop no-poaching clauses as a result of the pressure. 

The attorney general said Jersey Mike’s could have avoided the $150,000 payment by agreeing earlier to drop no-poaching clauses, but the chain had refused. Ferguson said the franchisor had dismissed his offer as a publicity stunt. His office then filed a lawsuit.

“Corporations that refuse to eliminate no-poach clauses can expect a lawsuit from my office,” Ferguson declared in his statement. “This sends a message to companies like Jersey Mike’s who refuse to take my deal: You’ll end up paying for it.”

About 41 of Jersey Mike’s 1,343 sandwich shops are located in Washington, according to the attorney general’s office. 

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