This week, the Huffington Post reported that sandwich maker Jimmy John’s requires even its lowest paid workers to sign oppressive non-compete agreements. The Jimmy John’s non-compete language is incredibly broad and is completely unjustified, especially when used with low-level employees. According to its terms, the non-compete prevents a low-level employee from taking a job at any business that get more than 10% of its revenue from selling “submarine, hero-type, deli-style, pita and/or wrapped or rolled sandwiches” for two years after leaving Jimmy John’s. It also says that the worker can’t take a job at this type of “competitor” if the new employer is located within 3 miles of the particular Jimmy John’s shop or within 3 miles of any other Jimmy John’s.
The idea of forcing low-level employees to sign such a broad non-compete agreement (or even any non-compete agreement) is ridiculous. On rare occasions it is necessary to have a non-compete agreement to protect a specific business interest, but this is not one of those occasions. Beyond the absurdity, agreements like this are also bad for the business.
Agreements like this make your company look evil. Seriously. When you make a majority of your money selling lunch to working people, it’s probably not a good idea to treat those same people like garbage. Whether or not you actually try to enforce the agreement (and it appears that Jimmy John’s has never tried to enforce this particular agreement) the fact that you force all employees to sign makes you look greedy, oppressive, and out of touch with your customer base. This is going to hurt the bottom line. In addition to being harmful, this agreement was a total waste of time because …
That’s right, Jimmy John’s non-compete agreement would almost certainly never be enforced by a court. In order to enforce a non-compete agreement, the business needs to demonstrate that the agreement is necessary to protect a legitimate business interest (and the desire to try to drive your competition out of business does not count).
Even if there is a legitimate interest, courts generally refuse to enforce non-compete agreements unless the restrictions are as narrow as possible. In this case, the restrictions – two year time limit and a three mile radius of any Jimmy John’s store – are designed to be as oppressive as possible. It’s amazing to me that a Jimmy John’s lawyer would draft such a blatantly absurd and unenforceable agreement; although it might relate to the next problem with the agreement which is …
With the reputation hit, and the impossibility of enforcement, this non-compete agreement was a complete waste of money. Consider the following costs:
With all these costs, what did Jimmy John’s gain? Nothing. Their strategy of making all employees sign these agreements was poorly thought out, if it was thought out at all. It provided no benefit and exposed Jimmy John’s to a huge risk.
If your business has trade secrets, by all means, you should be protecting them. Just make sure you are working with an attorney who understands the issues and can help you design a legitimate strategy to protect your business.
One final tip for Jimmy John’s; if you want to protect your business and keep your employees, try treating those employees right and stop acting like they are enemies who need to be oppressed and controlled.