The Illinois Attorney General sued Jimmy John’s over the use of its noncompete restrictions on June 8, 2016. The suit alleges that Jimmy John’s is violating state law by requiring its sandwich makers and delivery drivers (i.e. low-wage workers) to sign restrictive noncompetition agreements.
A copy of the lawsuit may be found here (Illinois v Jimmy John’s Enterprises, LLC). This lawsuit seeks to obtain a declaratory judgment that the non-compete agreements are unenforceable and void.
The noncompetition restrictions prevent Jimmy John’s employees from working for a competitor for two years after working for Jimmy John’s and within a three-mile radius of any Jimmy John’s. A “competitor” is defined as a store that made 10% of their revenues from sales of “submarine, hero-type, deli style, pita, and/or wrapped or rolled sandwiches.”
We reported in March 2015 that Jimmy John’s requirement to have sandwich makers and delivery drivers agree to noncompete restrictions as a condition of employment was simply absurd and those restrictions were arguably unenforceable:
However, the use of noncompete restrictions can deteriorate into the absurd. Consider for example that the Jimmy John’s sandwich franchise routinely requires its low-wage sandwich makers and delivery drivers sign non-compete restrictions.
Noncompete Agreements and Your Business – Don’t be Jimmy John’s
For Michigan employers, the Jimmy John’s noncompete lawsuit highlights three important points.
- First, while the Illinois lawsuit against Jimmy John’s does not directly impact Michigan companies, it is, nonetheless, relevant to the question of whether your employees should be required to sign a noncompete restriction. Specifically, Illinois, like Michigan law, calls for noncompete agreements to protect a legitimate business interest and be narrowly tailored as to duration, geographic restriction, and activity. With this in mind, the analysis for employers should focus on what legitimate business interests should be protected. Upon completing this assessment, employers should then concentrate on drafting reasonable noncompete restrictions to protect those interests.
- Second, if your company requires employees to sign noncompete restrictions, is it prepared to enforce those agreements? Debra Pressey of the News-Gazette reported that Jimmy John’s issued a statement in response to the Illinois lawsuit that it was previously sued in federal court over the use of its noncompete agreements. That lawsuit was dismissed after Jimmy John’s represented it would not seek to enforce such agreements. In response to the Illinois lawsuit, Jimmy John’s again reiterated it “would never enforce a noncompete agreement against our employee that might’ve signed one.” So why have a noncompetition restriction if it is not going to be enforced?
- Third and building on the preceding point, Jimmy John’s has now been sued, at least twice, for non-compete restrictions it has no intention of enforcing – assuming they were to begin with. Certainly this is not a great strategy or use of company resources. But where were its attorneys when it came to discussing these practical and legal issues? Perhaps too busy billing for the
recycling olddrafting of non-compete restrictions that may or may not fit the company’s business needs and that may not be enforceable in the first place?
In our experience over the years representing individuals sued for purportedly violating noncompete restrictions, cases like the Jimmy John’s noncompete agreement are not the exception. It is common to see employers seek to enforce non-compete restrictions under ridiculous circumstances on par with the Jimmy John’s example.
Conversely, we have also worked with employers who take the time to assess their business to understand what gives the business a competitive advantage. With that understanding, we collaborate to draft and implement tailored but strong noncompete restrictions to protect the company from unfair competition and that we believe will be enforceable.
For more information about Michigan non-compete law, as well as enforcing noncompete restrictions, please contact attorney Jason Shinn. Since 2001, Mr. Shinn has worked with clients to draft and assess non-compete restrictions. He also represents companies and individuals in noncompete disputes in federal and Michigan courts.