Jimmy John’s Drops Non-Compete Clauses for Sandwich Makers

January 19, 2017

ArvindGroverFor many corporate executives, non-compete agreements are just a part of doing business. Since companies want to hang on to top talent as long as possible, they often insert clauses in contracts that prevent employees from joining competitors for a certain amount of time. While this limits a staffer’s options when looking for a new job, their high-level status usually provides them with plenty of alternative choices.

That’s not quite the case for sandwich makers, however. While non-compete clauses are commonplace in the corporate world, for years franchisees of the chain Jimmy John’s imposed similar restrictions on regular line workers. The rules banned former employees from joining companies that earned more than 10 percent of their revenue from sandwiches and were located within 2 miles of a Jimmy John’s. While not official policy, the company included samples of these non-compete clauses in hiring packets they sent to franchisees. As a result, many locations instituted the rules under the impression that they were required.
Fortunately, the situation is much clearer now thanks to a recent decision by a New York court. Under a settlement, Jimmy John’s agreed to remove all non-compete clauses from its hiring packets and to discourage franchisees from imposing such restrictions in the future. In fact, the company is required to relay New York Attorney General Eric Schneiderman’s message that these agreements “limit mobility and opportunity for vulnerable workers and bully them into staying with the threat of being sued.” Despite this big decision, non-compete clauses remain a thorn in the side of many regular workers throughout the country. According to a White House report, about 15 percent of employees without a college degree have signed similar agreements along with 14 percent of people earning less than $40,000.

Questions:

 

  1. Should the government ban companies from imposing non-compete agreements on low-level employees?
  2. Are non-compete clauses ethical even when they apply to high-level corporate executives?

Source: Aruna Viswanatha, “Sandwich Chain Jimmy John’s to Drop Noncompete Clauses From Hiring Packets,” The Wall Street Journal, June 21, 2016. Photo by Arvind Grover.

Leave a Reply