On Wednesday, Illinois Attorney General Lisa Madigan filed suit against fast-food franchisor Jimmy John’s and several Jimmy John’s franchisees operating in Illinois claiming that Jimmy John’s and its franchises unlawfully require at-will, low-wage employees to sign non-compete agreements. The complaint asserts that at the time of hire, Jimmy John’s employees—including delivery drivers and sandwich makers—are required to sign non-compete agreements.
According to the complaint, the non-compete agreements prohibit any Jimmy John’s employee from working at any business that earns more than ten percent of its revenue from selling submarine, deli-style, pita or wrapped/rolled sandwiches, if the business is within two miles of a Jimmy John’s. This restriction is in place during their employment and for two years after they leave.
Madigan called these non-compete agreements oppressive and unethical in the complaint, adding in a separate statement, “[b]y locking low-wage workers into their jobs and prohibiting them from seeking better paying jobs elsewhere, the companies have no reason to increase their wages or benefits.” Madigan also insists that the agreements limit workers’ employment options, ability to seek higher wages or advancement, and ability to negotiate wages. Madigan comments that the business practice of using non-compete agreements similar to Jimmy John’s has an effect on trade and commerce throughout Illinois and limits the group of available workers to businesses.
In the past, Jimmy John’s has been criticized for the use of non-competes with its at-will, lower-paid employees because of the lack of competitive risk a sandwich maker or delivery driver could pose if he or she leaves Jimmy John’s to go to work at another restaurant that makes sandwiches.
While non-compete agreements are frequently used with top level management, the suit puts Illinois employers on notice that such agreements, when applied to at-will, low-wage employees, may be problematic. Courts in Illinois and elsewhere will often refuse to enforce non-competes that are overly broad or not reasonably tailored to protect an employer’s business interests. Some states, such as California, generally will not enforce non-compete agreements against employees at all. This lawsuit signals that not only are such agreements unenforceable, but, at least in the AG’s opinion, they are also illegal and may subject employers who use non-competes for lower level employees to liability for damages and monetary penalties. This lawsuit emphasizes that employers should make sure that non-compete agreements are narrowly tailored and only used when necessary to safeguard an employer’s legitimate business interests, such as protecting confidential information, trade secrets or customer relationships.
Thalia Pacheco is currently a first-year law student at DePaul University College of Law and is a Franczek Radelet LEADS Fellow.