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New York AG Investigates Jimmy John’s Non-Compete

New York – In the wake of reining in franchisors on unfair treatment of fast food workers, New York Attorney General Eric T. Schneiderman's is now looking into Jimmy John's for its unusual non-compete clauses for sandwich makers.

Huffington Post reported last October that many Jimmy John's counter workers have been required to sign non-compete contracts as part of their employment contracts. It states that they agree not to work at a competing sandwich shop for a period of two years while or after working at Jimmy John's. The sandwich chain considers a competitor to be any business that earns 10 percent or more of its revenue from sandwiches, such as a Dunkin' Donuts or McDonald's, and is within a three-mile radius of a Jimmy John's.

The news struck a chord with many lawmakers. A CBS Money Watch report stated that the agreement would shut workers out of sandwich-related jobs in much of the country. And that the news of such a contract for low-wage workers "brought widespread mockery and criticism upon the Illinois-based chain, with members of Congress asking the Federal Trade Commission to investigate."

CBS emphasized that non-compete agreements have generally been used for high-ranking executives or workers in a position to hold trade secrets or proprietary information. "But in recent years, they've been popping up even in low-wage service industry jobs," the report said. It pointed to another example given by the Huffington Post, that of doggy daycare. Camp Bow Wow also requires its dog-sitters to sign a non-compete agreement as a condition of employment.

Attorney General Schneidermann planned to send letters to Jimmy John's last Tuesday asking them to hand over information related to the chain's controversial non-compete agreements for workers. News reports state that an investigation by the Attorney General's office has already begun. Franchisees in New York will be asked to provide samples of any non-compete agreements distributed by Jimmy John's corporate office. They also ask for a list of job titles and responsibilities of any workers who've been asked to sign the contracts. Schneidermann also planned to ask Jimmy John's for its documents.

While the legality of non-competes varies from state-to-state, the AG feels these agreements may be somewhere outside of New York law. Schneidermann's letters to the franchisor refer to several court cases in his state. He notes that the non-compete agreements that inhibit workers from finding jobs are "disfavored by New York law." While some employers have a legitimate reasons for non-compete contracts, the AG questions why it would apply to those who make tuna sandwiches and deliver them on bicycles.

"Most of the employees subject to Jimmy John's non-competition agreement are highly unlikely to be privy to trade secrets or confidential customer lists or to provide unique services," a draft of the letter stated. One report added, "Further, the geographic breadth of the Non-Competition Agreement is staggering; it prevents employees from working for almost any sandwich shop within two miles of any Jimmy John's Sandwich Shop nationwide. As you no doubt are aware, Jimmy John's has multiple locations in nearly every state."

Franchisees who have spoken to the Huffington Post said they received the non-compete agreements as part of the company's standard employment package. Since the workers are employed by the franchisees, it is their responsibility to decide if they want to use them or if they would be in breach of standard operating procedures for the franchise system if they did not. Some have required all workers to sign the agreements, while others have only applied them to managerial employees.

Jimmy John's has so far declined to comment on the non-compete issue since it was first reported.

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About Janet Sparks

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Public Profile

Janet Sparks is the former publisher of the Continental Franchise Review, an industry newsletter that covered the franchise community for over 30 years. She has also been a columnist for a leading franchise magazine for the past 13 years. Today she is an independent journalist who engages in investigative reporting, tackling complex issues that impact the franchise industry.

Janet can be reached at jsparks@bluemaumau.org or at 303-799-7398.