Non-Compete Agreements for Entry-Level Employees?
We have long advised our clients that, to ensure the enforceability of restrictive covenants they require their employees to sign, the provisions should be tailored to protect the companies’ legitimate business interests. This is particularly important when requiring employees to sign non-compete agreements which are the broadest types of covenants and traditionally the most difficult to enforce. While some states, including Georgia, have made it easier in recent years to enforce such agreements, an ongoing case involving Jimmy John’s serves as a reminder that one size doesn’t fit all.
In a putative class-action lawsuit in Illinois, employees of the sandwich chain are challenging a non-compete agreement that covers entry-level positions, including employees who assemble sub sandwiches. The agreement applies for two years and prohibits employees from working for “any business which derives more than 10% of its revenue from selling submarine, hero-type, deli-style, pita, and/or wrapped or rolled sandwiches” within three miles of any Jimmy John’s. According to the employees’ attorney, the agreement covers a geographical area of approximately 6,000 square miles in 44 states and the District of Columbia. As a result of recent media attention on the case, 37 members of Congress have written the Department of Labor and the Federal Trade Commission requesting that the agencies investigate the company’s practice of requiring entry-level workers to sign non-compete agreements as a condition of their employment.
While the law in this area varies from state to state, many courts would likely have difficulty understanding what interest an employer has in prohibiting competition by entry-level employees who presumably do not, for example, have access to confidential information that they could use to give a competitor an unfair advantage. Regardless of what happens with the Jimmy John’s agreement, does the company require all employees, regardless of their level and responsibilities to sign the same agreement? Are your company’s restrictive covenants tailored to protect its legitimate business interests? And when deciding who must sign non-compete provisions, has the company considered which employees or classes of employees could pose a threat to one of those protectable interests if they leave?
If you have any questions about whether your company’s restrictive covenants are properly written, please respond to this e-mail or contact your Elarbee Thompson attorney for more information.