The sandwich chain Jimmy John’s
is getting some unwanted attention from the federal government amid reports
that it requires its low-level employees to sign noncompete agreements as a
condition of employment. The story was first reported by the Huffington Post,
and it resulted in Congressional Democrats sending a letter to the Federal
Trade Commission (“FTC”) and the U.S.
Department of Labor (“DOL”), describing the restrictive covenants as “clearly
anti-competitive and intimidating to workers.”
The House Democrats are asking for the FTC and the DOL to investigate
the sandwich chain.
Is Jimmy John’s doing something
illegal by making its sandwich-makers sign noncompetes? The answer is “no.” A better question to ask is whether it’s a
good idea, and the answer to that is “not really.”
In most states, this type of “restrictive
employment covenant” is generally not favored, but will be enforced by the
courts if the terms of the agreement are reasonable under the particular
circumstances. Generally, there are three
requirements: (1) the employer has a valid interest to protect; (2) the
geographic restriction is not overly broad; and (3) a reasonable time limit is
given. The employer bears the burden of
proving the reasonableness of the agreement.
The reason these types of agreements are construed very narrowly is that
most courts recognize that an employer is not entitled to protection against
ordinary competition from a departing employee.
Despite the efforts to make
this into a “federal case”, noncompete agreements are typically governed by
state law, which can vary depending on where you live or operate a
business. For instance, in the state of
Georgia, a noncompete agreement will be enforced only if the employee possesses
selective or specialized skills, learning, abilities, customer contacts,
customer information, and confidential information that that they have obtained
as the result of working for the company.
In Tennessee, Texas and Maryland, such agreements are enforceable only
against employees who had access to or were entrusted with the employer’s trade
secrets or other confidential or proprietary information. In other states, such as California, noncompete
agreements are generally unenforceable.
In most of the matters I’ve
handled involving noncompete agreements, the employees in question were either
highly trained individuals in technical fields, with direct access to their
employer’s trade secrets, or were high level sales people with similar access
to confidential customer information. The
lesson to be learned is that the use of these agreements should be confined to
key employees whose knowledge of trade secrets and other confidential information
could cause serious damage if they went to work for a competitor. I would be hard pressed to come up with a scenario where a fast food employer would legitimately need to have a crew worker enter into a noncompete agreement.
While I would be the first one
to laud the attributes of a well-made sandwich, I think it’s fair to say that
the average Jimmy John’s employee making your “J.J. Gargantuan®” is not privy
to any company trade secrets. By having
low-level employees sign noncompete agreements, the company does not appear to
be protecting any valid interest, and instead has brought itself some unwanted
attention (and ridicule).
Mark Fijman is a labor and employment attorney with Phelps Dunbar, LLP, which has offices in Louisiana, Mississippi, Florida, Texas, Alabama, North Carolina and London. To view his firm bio, click here. He can be reached at (601) 360-9716 and by e-mail at fijmanm@phelps.com
