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Employers should be wary of overly-restrictive non-compete agreements

Upon accepting a job offer with a company, many employers require that a new employee sign some sort of employee contract. Companies that sell proprietary products or services may also require that an employee agree to the terms of a non-compete clause or agreement.

Non-compete agreements are used to prevent an employee from going directly to work for a competitor and helps discourage former employees from sharing trade secrets and other information that may ultimately serve to financially harm a company. In order to be considered valid and enforceable, a non-compete agreement must meet certain criteria. For example, its existence must serve to “protect a legitimate business interest of the employer.” Additionally, the terms of the agreement must be deemed reasonable with regard to timeframe, scope and geography.

The scope and nature of a non-compete agreement that Jimmy Johns, the freaky-fast sandwich shop, required employees to sign is currently at issue in a class-action lawsuit. In the lawsuit, the plaintiffs, who are all former Jimmy Johns’ employees, argue the company’s “non-compete agreement is overly broad and oppressive to employees.”

Upon leaving their positions with Jimmy Johns, former employees are prohibited from working at a competitor employer for two years. The agreement goes on to further define a competitor as any “business which derives more than 10 percent of revenue … from sandwiches,” of various varieties. Additionally, a competitor cannot be located within three miles of any Jimmy Johns franchise location.

The geographic component of the non-compete agreement alone encompasses “6,000 square miles in 44 states” plus D.C. Given the breadth, scope and geography requirements imposed upon former employers by the non-compete agreement; it stands to reason the document will likely be deemed invalid in court. While there’s no record of Jimmy Johns actually trying to enforce the overly-broad and burdensome non-compete clause, the mere inclusion of these types of erroneous and unreasonable requirements is concerning and is now part of a lawsuit.

Employers must take measures to protect against possible legal action related to unreasonable restrictions and requirements for both current and former employees. In cases where a business has questions about how to protect proprietary information or is facing an employment lawsuit, it’s wise to consult with an attorney.

Source: Huffington Post, “Jimmy John’s Makes Low-Wage Workers Sign ‘Oppressive’ Noncompete Agreements” Dave Jamieson, Oct. 13, 2014