In the Ashlie Harris case against Carls, what was the primary allegation made by the plaintiff?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
es of any and all claims, including claims arising from this litigation, all without any admission of liability on any party. The Court granted the parties' stipulated motion to dismiss the case on October 14, 2022.
(2) Ashlie Harris v. CJ Star, LLC, Carl's Jr. Restaurants LLC, and DOES 1-10, (United States District Court, Eastern District of Washington, Spokane Division, Case No 2:18-cv-00247, filed August 3, 2018). On August 3, 2018, Ashlie Harris, a former employee of a Carl's Jr. franchisee, filed a lawsuit in the federal district court for the Eastern District of Washington. The plaintiff alleged that certain provisions in the applicable franchise agreement between us and our franchisees violate federal and state anti-trust statutes as they allegedly restrict the ability of our franchisees or company-owned stores from soliciting or hiring the employees of other of our franchisees or company-owned stores. The complaint sought to certify a class of franchisee employees in the state of Washington and recover treble damages stemming from
alleged underpayment of wages for current and former employees located in the state of Washington from July 12, 2014 to present. We denied that the provisions violate any law and filed a Motion to Dismiss the case. On or about April 1, 2019, the parties reached an agreement to settle the litigation with the following terms: (a) Defendants will pay Harris $5,000 and attorneys' fees in the aggregate amount of $20,000, (b) CJR has obtained amendments of the existing franchise agreements with Washington franchisees to remove non-solicitation/no-hire provisions, to the extent such provisions existed in the first place, and (c) CJR agreed not to enforce the disputed provision in existing agreements with Washington franchisees.
Source: Item 3 — LITIGATION (FDD pages 21–24)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, the Ashlie Harris case, filed on August 3, 2018, involved allegations that certain provisions in Carls's franchise agreements violated federal and state anti-trust statutes. Specifically, the plaintiff, a former employee of a Carls Jr. franchisee, claimed these provisions restricted the ability of franchisees or company-owned stores from soliciting or hiring employees of other franchisees or company-owned stores. The lawsuit sought to certify a class of franchisee employees in Washington state and aimed to recover treble damages for alleged underpayment of wages from July 12, 2014, onward.
Carls denied any violation of law and filed a Motion to Dismiss. Ultimately, the parties reached a settlement agreement around April 1, 2019. As part of the settlement, Carls agreed to pay Harris $5,000 and attorneys' fees totaling $20,000. Additionally, Carls committed to amending existing franchise agreements with Washington franchisees to remove non-solicitation/no-hire provisions, if such provisions existed, and agreed not to enforce the disputed provision in existing agreements with Washington franchisees. The court granted the motion to dismiss the case on April 23, 2019.
This type of "no-poaching" allegation is not uncommon in franchising, as franchisors often seek to protect their franchisees' and company-owned stores' investments in training and employee development. However, such restrictions can face legal challenges under antitrust laws if they are deemed to unduly restrain trade or limit employee mobility. The settlement terms, including the removal of the non-solicitation provisions and the payment of damages and fees, suggest that Carls took steps to address the plaintiff's concerns and mitigate potential legal risks associated with these types of provisions in their franchise agreements.