King County Superior Court judge denied Jersey Mike’s motion to dismiss
SEATTLE — A King County Superior Court judge ruled that Attorney General Bob Ferguson’s case against restaurant chain Jersey Mike’s may proceed. Jersey Mike’s previously filed a motion to dismiss Ferguson’s case against the company asserting the company’s use of no-poach provisions violates antitrust provisions of the state Consumer Protection Act.
Ferguson’s case against Jersey Mike’s is the first lawsuit Ferguson or any other state attorney general has brought against a corporation for its use of no-poach clauses.
“No-poach practices are wrong – and illegal,” said Ferguson. “Jersey Mike’s should do the right thing by its workers and make a legally binding commitment to end these practices. I look forward to continuing our challenge in court.”
In January 2018, Ferguson’s Antitrust Division launched an investigation into no-poach clauses. No-poach clauses appear in franchise agreements between owners of franchises and corporate headquarters. The clauses prohibit employees from moving among stores in the same corporate chain, a practice that economists believe stagnates wages.
In course of the investigation, the Attorney General’s Office found that Jersey Mike’s used no-poach language in its franchise contracts at its 41 Washington locations and estimated 1,343 locations nationwide.
During the investigation, Jersey Mike’s refused to remove no-poach language from its current and future contracts and enter into a legally binding contract with the Attorney General’s Office. In response, Ferguson filed a lawsuit against the company in October 2018. By that time, 30 corporate chains had signed legally binding agreements with the Attorney General to end the practice nationwide. The number of chains committed to ending the practice has since grown to 50, impacting more than 100,000 locations nationwide and benefiting millions of workers.
The lawsuit against Jersey Mike’s asserts that the company violated the law for years by maintaining no-poach clauses in its franchise contracts.
After the Attorney General’s Office began investigating Jersey Mike’s use of no-poach clauses, Jersey Mike’s claimed that it stopped enforcing the no-poach clauses in its franchise contracts. The company also began removing no-poach language from existing franchise agreements in Washington once Ferguson filed the lawsuit.
However, ceasing unlawful conduct does not prohibit the Attorney General from seeking penalties for previous unlawful conduct. In addition, Jersey Mike’s has refused to affirmatively remove the no-poach clauses from its existing national contracts. Whether or not a company enforces these provisions, their existence in current contracts remains unlawful.
Additionally, Jersey Mike’s has refused to sign a legally binding agreement with Ferguson’s office. Without a legally binding agreement in place, the company can return to using or enforcing the unlawful provisions in the future.
In November 2018, the restaurant chain filed a motion to dismiss Ferguson’s lawsuit. Today’s ruling ensures that the lawsuit will move forward.
Ferguson continues to investigate and obtain legally enforceable agreements from companies in his initiative to eliminate no-poach clauses nationwide. Like Jersey Mike’s, corporate chains that do not agree to end the practice face a lawsuit from Ferguson’s office.
More information on Attorney General Ferguson’s initiative to end no-poach practices nationwide can be found here.
Assistant Attorneys General Eric Newman and Rahul Rao of the Attorney General’s Antitrust Division are leading the no-poach initiative.
The Office of the Attorney General's Antitrust Division is responsible for enforcing the antitrust provisions of Washington's Unfair Business Practices-Consumer Protection Act. The division investigates and litigates complaints of anticompetitive conduct and reviews potentially anticompetitive mergers. The division also brings actions in federal court under the federal antitrust laws. It receives no general fund support, funding its own actions through recoveries made in other cases.
The Antitrust Division investigates complaints about potential anti-competitive activity. For information about filing a complaint, visit https://fortress.wa.gov/atg/formhandler/ago/AntitrustComplaint.aspx.
The Office of the Attorney General is the chief legal office for the state of Washington with attorneys and staff in 27 divisions across the state providing legal services to roughly 200 state agencies, boards and commissions. Visit www.atg.wa.gov to learn more.
Brionna Aho, Communications Director, (360) 753-2727; email@example.com