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Do You Really Need Non-Compete Agreements With Your Hourly Employees?

On Behalf of | Feb 1, 2017 | Corporate / Business, Employment / Labor, Firm News

On December 7, 2016, the Chicago Tribune reported that sandwich maker Jimmy John’s had agreed to a $100,000.00 settlement with the Illinois attorney general over its use of non-compete agreements with its hourly employees.  Those agreements barred employees from working at another sub shop while employed with Jimmy John’s and for a period of two years thereafter.  According to the Article, the AG will use the settlement money for “education and outreach” on how non-compete agreements can be enforced.  Jimmy John’s also agreed to remove the non-compete agreements from materials required from new hires, and to notify current and former employees that their non-competes would not be enforced.   Jimmy John’s had previously settled a similar claim by the New York attorney general’s office.

The question that immediately comes to mind is: What were they thinking?  Did Jimmy John’s management really think that their business would be harmed if some self-absorbed teenager or bored college student quit to go to work for Subway?  What “trade secrets” could they possibly take with them?  Or, with increasing numbers of workers dependent on low-paying service jobs, was this just a way of deterring employees from jumping ship because the shop down the street offered them fifty cents an hour more?

Whatever the reason, employers really need to think hard about requiring low-level employees to execute non-compete agreements, for a number of reasons.

First, some states are moving to prohibit them.  Illinois, for instance, passed a law that prohibits non-compete agreements for any employee making less than $13 per hour.  Even in the absence of a specific prohibition, you could find yourself on the wrong end of a lawsuit, just like Jimmy John’s did.

Second, the law does not favor non-compete agreements, and judges will strictly construe them against the employer.  That means that judges will look for any reason not to enforce the agreement.  The fact that a low-level hourly employee could not conceivably take with them anything other than how to make sandwiches all day long will certainly influence the court’s decision as to the enforceability of the agreement.

The third reason is closely tied to the second.  A non-compete agreement is only as good as the employer’s willingness to enforce it.  And enforcement is expensive.  Are you really going to go to court to try to keep some hourly employee from going to work for the sandwich shop down the street?   And if you’re not, doesn’t that speak to how seriously you take these agreements with all of your employees?

Bottom line, non-compete agreements should be limited to those employees who could really hurt the business by jumping to a competitor.  And be ready to enforce those agreements if they do.

For a confidential analysis of your non-compete issues, or questions about TRC’s employment practice area, please contact W. James Rogers, Esquire at (412) 316-8651 or [email protected].

Important NoticeThis information is intended for general guidance only, and should not be used as a substitute for specific legal advice.  For specific legal advice applicable to your situation, you should consult an attorney of your choice.  Although believed to be accurate when written, no guarantee of completeness or accuracy to your particular circumstances should be implied.  Laws, regulations, and court decisions in this area change frequently, and you should consult the attorney of your choice for up-to-date information.