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Overzealous Non-Competes Lead to New York AG Investigation


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1/1/2015
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Image: Nicholas Eckhart

Apparently, an employer who goes overboard with their non-competes risks a lot more than just having a court find the agreements unenforceable; it seems they could incur the wrath of the New York State Attorney General, and trigger an investigation into their employment practices.

And, that is precisely what appears to have happened to the restaurant chain Jimmy John's, who compelled their minimum-wage employees to sign non-compete agreements barring them from working for any store that:

"(1) makes more than 10% of its revenue from selling sandwiches; and,

(2) is located within a two-mile radius of any Jimmy John’s Sandwich shop nationwide.”

While New York's courts will honor non-compete agreements when tailored to protect a business's legitimate interests, they were never intended to protect an employer who seeks to prevent minimum-wage workers that had no access to, or knowledge of, any corporate trade secrets whatsoever from advancing to better-paying jobs.

To be sure, an Attorney General stepping into a private employment contract dispute such as this is rare. But on some level, the ultimate outcome of this investigation is almost secondary the central takeway which is this:

I cannot imagine there is any employer that would welcome being investigated, let alone by an Attorney General. Simply put, even if the investigation is ultimately dropped, he loses the time, effort, money and aggravation of defending against the investigation.

In this instance, at least at first blush, there doesn't seem to be any valid business justification for trying to force low-level employees into, effectively, indentured servitude. Therefore, employers would be wise to limit their non-competes to those "key" employees who have access to sensitive corporate information and client lists, and thereby avoid triggering an investigation by pro-worker governmental authorities.



Category: Non-Compete & Employment Agreements

Jonathan Cooper
Employment Litigation and School Negligence Lawyer

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