Sandwich maker Jimmy John’s won dismissal of a putative class action regarding non-compete agreements. Despite the win, this case and subsequent government attention may indicate increasing scrutiny of such agreements on both the federal and state level.
According to Court filings, Jimmy John’s requires all employees to sign a Confidentiality and Non-Competition Agreement which “prohibits former employees from working at food service venues which derive 10% or more of their revenue from the sale of sandwiches, submarines, or wraps.”
Two Jimmy John’s employees filed a putative class action against the restaurant. Among several claims, the employees asked for declaratory and injunctive relief declaring these non-compete agreements to be void. The employees argued that the non-compete agreements were overly broad and oppressive.
In dismissing this claim, the Court found that the Plaintiffs lacked standing because they did not have a “reasonable apprehension” that Jimmy John’s would file suit to enforce the non-compete agreements. Key to the Court’s analysis appears to be the fact that Jimmy John’s promised not to enforce the agreements against the Plaintiffs in the future. The Court did not, however, rule as to whether the agreements were enforceable or proper.
This case attracted a great deal of attention, and even sparked calls for a government investigation by Members of Congress. In October 2014, 37 members of Congress sent a letter to the Department of Labor and Federal Trade Commission, asking the bodies to investigate and calling Jimmy John’s practice of requiring non-compete agreements for all employees “anti-competitive” and “intimidating.” (The letter did note that non-compete agreements can be valuable in certain circumstances.)
The status of any government investigation is unknown, and it is also unclear whether Jimmy John’s court victory will stop any additional regulatory action.
Class action lawsuits in the non-compete arena are uncommon, but this case may signal a new trend in employment litigation.
What do you think of the Jimmy John’s case?