New York Attorney General Eric T. Schneiderman announced yesterday that Jimmy John’s Gourmet Sandwiches agreed to stop including sample non-compete agreements in hiring packets it sends to its franchisees. Jimmy John’s also agreed to inform its franchisees that the Attorney General has concluded the non-compete agreements are unlawful and should be voided.
Jimmy John’s, a sandwich chain, distributed unlawful sample non-compete agreements to franchisees, including its New York franchisees, for use with restaurant workers and delivery drivers. The non-compete agreements prohibited sandwich makers, for a period of two years after leaving a job with Jimmy John’s, from working at any establishment within a two-mile radius of a Jimmy John’s location that made more than 10% of its revenue from sandwiches.
“Non-compete agreements for low-wage workers are unconscionable,” said Attorney General Schneiderman. “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.”
This agreement concludes an investigation that began with inquiries to Jimmy John’s corporate offices and its New York franchisees in December of 2014. The investigation revealed that some, but not all, franchisees in New York State utilized the non-compete agreement. Those franchisees that did use the agreements have agreed to void past agreements and discontinue their usage.
New York law does not permit the use of non-compete agreements, except in very limited circumstances. For example, a non-compete agreement may be allowed to protect trade secrets or in relation to employees with uniquely special skills.
Last week, the Attorney General’s Labor Bureau also reached an agreement with Law 360, a legal news media company, to discontinue its use of non-compete agreements. Recently, the negative economic effect of pervasive, unwarranted use of non-compete agreements has been the subject of national news articles and research reports. A March 2016 report published by the U.S. Treasury Department found that non-compete agreements cause various harms to “worker welfare, job mobility, business dynamics, and economic growth more generally.” A May 2016 report published by the White House concluded that non-compete agreements also depress wages and inhibit innovation. Some states have taken action to combat such agreements: California and Oregon have laws prohibiting non-compete agreements altogether or sharply limiting their use, and Massachusetts and other states have similar bills pending. Federal lawmakers are also concerned about the severe and unfair restrictions such agreements place on the lowest-paid workers.