Class action against Tim Hortons parent accuses company of suppressing workers’ wages for years through unlawful “no-hire” agreements with franchisees

BIV's lawsuit of the week

A former baker at a Surrey Tim Hortons is suing the company’s corporate parent, claiming in a class action that The TDL Group Corp. unlawfully forces franchisees to sign so-called “no-hire” agreements to prevent employee poaching between restaurants, allegedly suppressing workers’ wages for years.

Lead plaintiff Samir Latifi filed a notice of civil claim under the Class Proceedings Act in BC Supreme Court on July 18. According to the claim, the TDL Group Corp. and its franchises employ more than 100,000 people in Canada, with approximately 3,860 locations across the country.

“In addition to being the franchisor of Tim Hortons restaurants, TDL operates Tim Hortons restaurants in the same markets as its franchisees,” the claim states. “Thus, TDL has dual roles: it is the franchisor and also a competitor of its own franchisees – TDL competes with franchisees as a vendor of food and as a purchaser of labour.”

The company’s franchise agreement contains a clause banning “franchisees from soliciting or hiring existing employees of other Tim Hortons brand restaurants.” Latifi claims the no-hire clause was a deliberate form of wage suppression to “increase profits for TDL and its franchisees at the expense of employees.

“It is in the independent interest of Tim Hortons restaurant owners to compete for the most conscientious, talented and experienced employees,” the claim states. “The No-Hire Clause artificially restricts the ability of Tim Hortons restaurant owners to compete to hire employees in a manner consistent with their individual economic interests. But by acting in concert, they protect themselves from having their own employees poached by other Tim Hortons restaurants that may place higher value on those employees for their training, experience or work ethic.”

Meanwhile, the practice has seen fast food companies ensnared in anti-trust enforcement measures taken in the United States, including Tim Hortons USA Inc., which culminated in substantially similar clauses being removed from U.S. franchise agreements.

“To date, the harm caused by No-Hire Clauses continues in Canada,” the claim states.            

Latifi seeks class certification and damages for Competition Act violations, conspiracy, and unjust enrichment. The allegations have not been tested in court and the TDL Group Corp. had not filed a response to the claim by press time.