Jimmy John’s non-compete agreements come under fire

New York Attorney General Eric Schneiderman’s office is requesting information about employee non-compete agreements used by Jimmy John’s, a national sandwich shop chain.

Last week, Schneiderman’s office sent two letters to Jimmy John’s management, including founder James J. Liautaud, who launched the company in 1983. The inquiry notes that some New York-based franchisees of the Champaign, Ill.-based Jimmy John’s franchise required certain employees to “sign a highly restrictive employee confidentiality and non-competition agreement,” which the Attorney General’s office says “raises serious concerns” regarding whether these agreements are legal under New York law.

The non-compete agreements – which extend for a two-year period after end of employment – block any employee from working for any other business that “(1) makes more than 10% of its revenue from selling sandwiches and (2) is located within a two-mile radius of any Jimmy John’s Sandwich shop nationwide.” Also, past employees are unable to work for another Jimmy John’s franchisee for one year.

See also: Massachusetts lawmakers consider non-compete ban

While noting the restrictive nature of the agreements in question, Richard Cohen, partner in Fox Rothschild’s New York office, explains that employers typically have legitimate reasons to restrict high level trade secrets or client information from competing, but “at least in this case, [the employer] overreached to the point that they incurred the wrath of the New York State Attorney General.”

“The trend has been, and I think it’s an unfortunate one, for employers to extend these non-competes to everyone in the workforce,” continues Cohen. “We live in a society that values free commerce, free labor, and here are employers who claim to value capitalism, but are trying to restrict even a line worker who makes minimum wage from working.”

Jimmy John’s didn’t immediately respond to requests for comment.

Most employees subject to Jimmy John’s non-compete agreement “are highly unlikely to be privy to trade secrets or confidential customer lists or to provide unique services,” Schneiderman’s office said in the Dec. 23 letters. “Further, the geographic breadth of the non-competition agreement is staggering; it prevents employees from working for almost any sandwich shop within two miles of any Jimmy John’s sandwich shop nationwide.”

“As you no doubt are aware, Jimmy John’s has multiple locations in nearly every state,” the Attorney General’s office continued. Specifically, according to the company, there are over 1,900 corporate and franchised locations in 43 states through the U.S.

New York officials say those agreements that prevent an employee from pursuing a similar job are “disfavored” by New York law. Generally, an employer’s interests are limited to “protection against misappropriation of trade secrets and confidential customer lists,” as well as a reasonable limitation on geographic reach and time, Schneiderman’s Labor Bureau Chief Terri Gerstein said in the correspondence.