Reference no: EM132841162
STORY: CASES FROM THE REAL WORLD
Non-Compete Agreements
After an investigation by then-New York attorney general Eric Schneiderman, fast-food franchisor Jimmy John's announced in 2016 that it would not enforce non-compete agreements signed by low-wage employees that prohibited them from working at other sandwich shops, and it agreed to stop using the agreements in the future. Jimmy John's non-compete agreement had prohibited all workers, regardless of position, from working during their employment and for two years after at any other business that sold "submarine, hero-type, deli-style, pita, and/or wrapped or rolled sandwiches" in a geographic area within two miles of any Jimmy John's shop anywhere in the United States.13
Schneiderman said of the agreements, "They limit mobility and opportunity for vulnerable workers and bully them into staying with the threat of being sued." Illinois Attorney General Lisa Madigan had also initiated action, filing a lawsuit that asked the court to strike down such clauses. "Preventing employees from seeking employment with a competitor is unfair to Illinois workers and bad for Illinois businesses," Madigan said. "By locking low-wage workers into their jobs and prohibiting them from seeking better paying jobs elsewhere, the companies have no reason to increase their wages or benefits."14
Jimmy John's has more than 2,500 franchises in forty-six states, so its agreement meant it would be difficult for a former worker to get a job in a sandwich shop in almost any big city in the United States.
QUESTIONS:
- Other than being punitive, what purpose do non-compete agreements serve when low-level employees are required to sign them?
- Suppose an executive chef or vice president of marketing or operations at Jimmy John's or any large sandwich franchise leaves the firm with knowledge of trade secrets and competitive strategies. Should he or she be compelled to wait a negotiated period of time before working for a competitor? Why or why not?
- What is fair to all parties when high-level managers possess unique, sensitive information about their former employer?
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