On Wednesday, Illinois Attorney General Lisa Madigan made a freaky fast (in Jimmy John’s parlance), but not freaky good, delivery to Jimmy John’s—a lawsuit for allegedly imposing “highly restrictive” unenforceable noncompete agreements on its workers.
The complaint, filed in Illinois state court, claims Jimmy John’s requires its “at will, low-wage” employees, including sandwich-makers, delivery staff, and assistant managers, to sign facially unenforceable non-competition agreements. The agreements in question are alleged to bar such employees from working for any other sandwich store within several miles of any Jimmy John’s nationwide that earns more than 10 percent of its revenue from selling sandwich-type products for up to two years after their Jimmy John’s employment.
In a novel move, the Illinois Attorney General brought the action under the state’s Consumer Fraud and Deceptive Business Practices Act (which, in relevant part, prohibits “[u]nfair methods of competition and unfair or deceptive acts or practices…”), as well as the Illinois Attorney General’s “common law and paren patriae authority as Attorney General to represent the People of the State of Illinois.” The lawsuit essentially argues that the noncompete agreements in question are facially unreasonable and unenforceable under Illinois common law because they are overbroad, lack consideration, and do not (as applied to the “low-wage” employees at issue) protect any legitimate business interest such as access to trade secrets or long-term customer relationships. The Attorney General contends that the sandwich shop has no legitimate business interest in preventing low-wage workers from seeking jobs with competing businesses.
The suit also claims that Jimmy John’s noncompete agreements harm its employees, the general public, and Illinois businesses, including by interfering with the mobility of labor, diminishing the pool of available workers, and suppressing wages. Furthermore, the Illinois Attorney General contends that Jimmy John’s has engaged in deceptive practices, including by deciding not to enforce such agreements (which the company has informed the Attorney General’s Office) without telling its employees or franchisees of that fact. The suit seeks a declaration that the noncompete agreements are unenforceable, an injunction against their use, and monetary penalties and other remedies under the Illinois Consumer Fraud and Deceptive Business Practices Act.
In its news release accompanying the filing of the lawsuit, the Attorney General said that this suit may not be the last of its kind. It remains to be seen whether this attack on the popular chain’s noncompetes will also expand to covenants that restrict higher-level and better compensated employees, and whether private individuals will file similar claims under the Illinois statute. It also remains to be seen whether the action will withstand a motion to dismiss.
In any event, these developments reflect the continuing trend of scrutiny by courts and other government entities of restrictive covenants. They also reiterate the need for employers to carefully consider the nature and extent of any covenants they use and the types of covenants (if any) to use with various employee populations, and to tailor any such covenants appropriately so that they are reasonably necessary to protect employers’ legitimate business interests.