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Monday, October 13, 2014

Jimmy John's Requires Noncompete Agreements for Sandwich Makers

From the Huffington Post:

A Jimmy John's employment agreement provided to The Huffington Post includes a "non-competition" clause that's surprising in its breadth. Noncompete agreements are typically reserved for managers or employees who could clearly exploit a business's inside information by jumping to a competitor. But at Jimmy John's, the agreement apparently applies to low-wage sandwich makers and delivery drivers, too. 
By signing the covenant, the worker agrees not to work at one of the sandwich chain's competitors for a period of two years following employment at Jimmy John's. But the company's definition of a "competitor" goes far beyond the Subways and Potbellys of the world. It encompasses any business that's near a Jimmy John's location and that derives a mere 10 percent of its revenue from sandwiches.
The full agreement is available here.

The article points out that there have not been any reported instances of the sandwich company attempting to enforce its noncompete agreement. This seems sensible to me, since the geographic, temporal, and practical breadth of the noncompete provision might give courts pause before enforcing the agreement.

While the law of noncompete agreements varies between states, the Jimmy John's provision would almost certainly be struck down in a California court. As this report from White & Case explains, California is notably hostile towards noncompete claims, and only permits them in narrow circumstances, such as when the a partnership, limited liability, or other ownership share in a business is sold. The departure of a sandwich-making employee to a similar business does not seem to fall into any of the exceptions to California's prohibition on noncompetes.

I have blogged about some of Jimmy John's previous legal travails here. Unlike that prior incident (involving a misguided class action lawsuit brought about by the absence of sprouts), this noncompete situation seems to involve a bit more of a misstep on the company's part.

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