POLITICS
12/22/2014 09:00 pm ET Updated Dec 23, 2014

New York Attorney General Goes After Jimmy John's Over Noncompete Agreements

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New York Attorney General Eric T. Schneiderman plans to send letters to Jimmy John's sandwich shops on Tuesday asking them to hand over information related to the chain's controversial noncompete agreements for workers, according to Schneiderman's office.

As HuffPost first reported in October, many rank-and-file workers at Jimmy John's have been required to sign noncompete contracts in which they agree not to work at a competing sandwich shop for a period of two years following their employment at Jimmy John's. A competitor is broadly defined as any business that earns 10 percent or more of its revenue from sandwichs and is located within three miles of a Jimmy John's.

The agreement would shut workers out of sandwich-related jobs in much of the country. 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.

In New York state, an investigation already appears to be moving. In the letters Schneiderman plans to send, copies of which were provided to HuffPost by his office, New York-based Jimmy John's franchisees will be asked to provide samples of any noncompete contracts distributed by Jimmy John's corporate, as well as a list of the job titles and responsibilities of any workers who've been asked to sign them.

In a separate letter, Schneiderman plans to ask Jimmy John's corporate offices in Illinois for the same documents.

Noncompete 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. As HuffPost reported in November, the doggy day care franchise Camp Bow Wow requires its dog-sitters to sign a noncompete agreement as a condition of employment.

Aside from the fact that the agreements can be intimidating, they prevent employees from taking their work and skills to the highest bidder in a free labor market. By tethering employees to their current jobs, the agreements reduce workers' bargaining power.

Schneiderman's office seems to think the Jimmy John's noncompete agreement may run afoul of state law. The legality of noncompetes varies from state to state, with California, for instance, barring them in all but a few instances. Schneiderman's letters refer to several court cases in New York and note that noncompete agreements that inhibit workers from finding new jobs are "disfavored by New York law."

In many cases, an employer may have a "legitimate concern" regarding the theft of trade secrets, Schneiderman says, but it isn't clear how that applies to people who make tuna sandwiches or deliver food by bicycle.

"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 reads. "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."

Jimmy John's has declined to comment on the noncompete agreement since it was first reported.

According to Jimmy John's franchisees HuffPost has spoken to, the noncompete agreement was distributed in a standard hiring packet issued by the corporate office. Since store workers are employed by franchisees rather than Jimmy John's corporate, it has been left to franchisees to execute the agreements. Some franchisees have required all workers to sign them, while other franchisees applied them solely to workers in managerial roles.

One Jimmy John's store owner told HuffPost that since the noncompete came to light, several franchisees have jettisoned it from their hiring packet for rank-and-file workers.

HuffPost

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