No-poach clause in a franchise agreement

A franchisee meets this term in a franchise agreement or a system rule limiting hiring across locations. Paragraph 45(1.1)(b) covers an employer who, with another employer not affiliated with that person, conspires, agrees or arranges to not solicit or hire each other’s employees. Paragraph (a) covers agreeing to fix, maintain, decrease or control salaries, wages or terms and conditions of employment.

Defence and open points

Subsection 45(4) sets a defence where the person establishes, on a balance of probabilities, that the agreement is ancillary to a broader or separate agreement that includes the same parties and is directly related to, and reasonably necessary for giving effect to, its objective, and the broader agreement, considered alone, does not contravene the subsection. Subsection 45(7) also keeps certain common law regulated-conduct defences for subsection (1.1). Whether franchise parties are affiliated, and whether a clause fits the defence, turns on the facts.

What to ask

• Who are the parties to the clause: franchisor and franchisee, or franchisees with each other?
• Are those employers affiliated with one another?
• What broader agreement is the clause said to support?

For a sale, see what a buyer and seller can agree about pay and hiring.