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I’ve never eaten at Jimmy John’s, but they must have some incredible sandwiches, made with either top secret ingredients or through a confidential process (or both!). It turns out that this sandwich chain requires its hourly workers to sign non-compete agreements, prohibiting its employees from working for a competitor for two years(!) after leaving Jimmy John’s. I don’t know how I missed that, but it was apparently widely reported back in October, in Business Insider and the New York Times, among other publications.
According to the New York Times article, this isn’t really all that uncommon, as more and more employers are requiring low- and moderate-wage workers to sign these agreements. But, it seems to me very unlikely that these agreements would be enforceable in New York. Plus, given the expense of enforcement, it is doubtful that any employer would truly think it worth the cost of litigating these agreements. But, a low-wage under threat of litigation and unable to afford a lawyer to defend them in such an action may not know that, and feel trapped in their current job.
In New York, these agreements are more common among professionals, executives, and higher-paid salespersons with access to confidential business-related information. And, even in those situations enforcement is not a sure thing. Restrictive covenants in employment—also referred to as non-compete clauses—are generally not favored, and will be enforced by the courts only to the extent they are reasonable and necessary to protect legitimate business interests, such as the protection of an employer’s trade secrets or confidential customer lists, or protection from an employee whose services are unique or extraordinary. Courts have also held that employers have a legitimate interest in preventing former employees from exploiting the goodwill of a client or customer, which had been created and maintained at the employer’s expense, to the employer’s competitive detriment. What legitimate interest would a sandwich chain have to justify preventing one of its sandwich-makers from leaving and working for a competitor?
This may all be moot if Congress passes the Mobility and Opportunity for Vulnerable Employees (MOVE) Act (not to be confused with the Military and Overseas Voter Empowerment Act). According to the press release issued by one of the sponsors, the legislation:
will enable low-wage workers to seek higher-paying jobs without fearing legal action from their current employer. The MOVE Act will ban the use of non-compete agreements for employees making less than $15 an hour, $31,200 per year, or the minimum wage in the employee’s municipality, and will require employers to notify prospective employees that they may be asked to sign a non-compete agreement.
According to the press release, it is estimated that 8-15% of low-wage workers are asked to sign non-compete agreements in an effort to dissuade those workers from seeking better, higher-paying jobs within the same industry. Although such agreements in these contexts may ultimately prove to be unenforceable in many jurisdictions, passage of the MOVE Act would remove any doubt with respect to these employees.
For more information about restrictive covenants and some recent developments in New York law, I invite you to read the latest posting on our firm’s website: New York Employers Could Soon Have More Difficulty Enforcing Restrictive Covenants.