For many companies, non-compete agreements are used to protect trade secrets, business plans and intellectual property. But why is Jimmy John’s, a sandwich chain, requiring its low wage workers to sign non-compete agreements?
These agreements do not allow employees to work for a competing sandwich shop for a period of two years following their employment at Jimmy John’s.
This prompted lawmakers to investigate the company’s policy that bars their workers from working for its competition. House members Rep. Joseph Crowley and Rep. Linda Sánchez call the practice “a form of intimidation.” Jimmy Johns under Fire for Worker Contracts. Together they have drafted a letter asking the Labor Department and the Federal Trade Commission to investigate the reports. But questions still linger. What does this do to the low wage worker? How are their rights impacted? And what are Non-Compete Agreements anyways?
To begin, a non-compete agreement is a contract between an employee and an employer, where the employee agrees not to enter into competition with the employer after they terminate employment. Non-Compete Agreements: Overview. These were once reserved and considered to be commonplace among certain professions. For instance, think of the workers at Coca-Cola who work closely with the secret recipe. It is understandable that their employees sign non-compete agreements not to work for Pepsi immediately after terminating their employment, due to the possibility they may reveal information that gives the new employer a competitive advantage.
Courts usually disapprove of non-compete agreements as they limit the employees ability to earn a living. This can greatly impact the low wage worker with specific set of skill. The court must balance the need to protect the employer’s legitimate interest with any burden that enforcement of the agreement would place on the employee. Additionally, the Court must determine if the duration and scope of the agreement is reasonable. Remember that Jimmy John’s is asking their employees who terminate their employment to wait two years before seeking new employment.
As this issue progresses it will be important for all those investigating to consider how some states have chosen to approach the topic. California, for example, has forbidden the use of non-compete clauses, providing for a few exceptions (California Non-Compete Site) while other states require that the use of non-competes be reasonable in scope.
It is unclear where this will lead. But it is clear that Jimmy John’s use of the non-compete clause intimidates its low-wage workers and places a restraint on them to find better work.
For more information on non-compete agreements and their impact in the workplace visit: http://www.workplacefairness.org/noncompete
About the Author Olivia Nedd is a legal intern for Workplace Fairness and a student at Howard University School of Law.
