Jimmy John's Sandwich Chain Drops Noncompete Pacts

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By John Herzfeld

June 22 — The Jimmy John’s sandwich chain has agreed to stop including sample noncompetition agreements in hiring packets it sends to franchisees, New York Attorney General Eric T. Schneiderman (D) announced June 22.

The settlement, which resolved an investigation that began in December 2014 with inquiries to Jimmy John’s corporate offices and its New York franchisees, also requires the chain to inform the franchisees that the attorney general has concluded that the noncompete agreements are unlawful and should be voided.

The state investigation revealed that some Jimmy John’s franchisees in New York utilized the noncompete agreements, Schneiderman said. They’ve pledged to stop and also to void past agreements, he said.

New York law does not permit the use of noncompete agreements unless an employee has uniquely special skills, access to trade secrets or meets other limited conditions, Schneiderman said.

Two-Year Term, Two-Mile Radius

The noncompete agreements in the Jimmy John’s packet, for restaurant workers and delivery drivers, prohibited sandwich makers for two years from working at any establishment within a two-mile radius of a Jimmy John’s location that made more than 10 percent of its revenue from sandwiches, he said.

“Non-compete agreements for low-wage workers are unconscionable,” Schneiderman said in a statement. “They limit mobility and opportunity for vulnerable workers and bully them into staying with the threat of being sued. Companies should stop using these agreements for minimum wage employees.”

The agreement with the sandwich chain came a week after Schneiderman’s Labor Bureau reached a similar settlement barring the legal news publisher Law360 from requiring noncompete agreements from all its employees, except its editor-in-chief, managing editor and graphics chief.

Follows Illinois Lawsuit

The New York settlement with Jimmy John's comes two weeks after a lawsuit by Illinois Attorney General Lisa Madigan challenging the sandwich chain's use of noncompete agreements.

In a statement, the company said it had worked closely with Schneiderman’s office and “provided assurances that, as a franchisor, we would not support the enforcement of a franchisee’s non-compete agreement against an in-store employee.”

The company also noted the settlement’s terms for informing New York franchisees “that these agreements are disfavored by New York law and that the OAG believes that those franchisees should void any such agreements.”

The statement commended the “professionalism” of the attorney general’s office throughout the matter and expressed appreciation for “the opportunity to have worked together.”

To contact the reporter on this story: John Herzfeld in New York at jherzfeld@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com

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