Why it matters

Restaurant chain Jimmy John’s promise not to require workers to sign noncompete agreements sealed the deal in an action brought by the New York Attorney General. AG Eric T. Schneiderman launched an investigation into the fast food restaurant’s agreements in December 2014 that prohibited sandwich makers from working for a competitor of the fast food chain for a two-year period. Characterizing the agreements as “unconscionable,” the AG reached a deal requiring Jimmy John’s to stop providing the agreements (which defined a “competitor” as an establishment that made more than 10-percent of its revenue through sandwich sales located within two miles of a Jimmy John’s location) to franchises in the state. The agreements “limit mobility and opportunity for vulnerable workers and bully them into staying with the threat of being sued,” the AG said in a statement, indicating that similar cases could follow. “Companies should stop using these agreements for minimum-wage employees.”

Detailed discussion

In December 2014, the New York Attorney General’s Office launched an investigation into restaurant Jimmy John’s, expressing concern about the national fast food chain’s use of noncompete agreements.

According to the AG, the parent company distributed the agreements to franchises throughout the state for use with restaurant workers and delivery drivers. The agreements prohibited the workers 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 for a period of two years.

Not all of the franchises used the noncompetes, the AG’s investigation determined, but Jimmy John’s agreed to stop using the agreements for minimum-wage workers in the state.

In a statement, the company said it would inform franchisees in the state that the agreements are no longer enforceable. “We worked closely with the [AG’s Office] and provided assurances that, as a franchisor, we would not support the enforcement of a franchisee’s noncompete agreement against an in-store employee,” a spokesperson for Jimmy John’s said.

Schneiderman’s office has kept a close eye on the use of noncompetes in the state, reaching a similar deal with a legal news media company in June. New York law only permits the use of noncompete agreements in “very limited” circumstances, the AG noted, such as to protect trade secrets or in relation to employees with special skills. Some states—including California and Oregon—prohibit the use of noncompetes altogether.

“Noncompete 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.”