The sandwich chain Jimmy John’s has reached a settlement with Attorney General Lisa Madigan on accusations it imposed highly restrictive non-compete agreements on its low-wage shop employees and delivery drivers.
The settlement involves nearly 300 sandwich shops in Illinois that are franchise- or corporate-owned.
The non-compete agreement had restricted employees during their employment and for two years after from working in any other business that earned more than 10 percent of its revenue from selling “submarine, hero-type, deli-style, pita, or wrapped or rolled sandwiches.” The work restriction applied to any sandwich business within three miles of any Jimmy John’s Sandwich Shop in the country, which later modified the geographic limitation to two miles from any Jimmy John’s in the country.
The chain will be required to notify all current and former employees that their non-competition agreements are unenforceable and confirm that Jimmy John’s does not intend to enforce them. The chain will also have to notify all franchisees in Illinois of the change and ask them to rescind any non-compete agreements they used based on a model provided by Jimmy John’s corporation.
A process will be implemented to remove all non-compete agreements from Jimmy John’s new-hire packets and stores.
In addition, the restaurant chain will pay $100,000 to the Attorney General’s Office to use toward education and outreach to raise public awareness about the legal standards for enforcing non-compete agreements and promote employer best practices.
“This settlement helps ensure Illinois’ workers have freedom to change jobs in order to seek better wages, further their careers and improve their lives,” Madigan said. “Workers in Jimmy John’s sandwich shops should know they are not subject to these unfair and unenforceable agreements.”
Madigan filed a lawsuit in June claiming Jimmy John’s required all employees to sign a non-compete agreement as a condition of employment. The lawsuit contended the agreement was illegal and unenforceable under state law.
Madigan’s office is investigating several other employers for use of unenforceable non-compete agreements.
According to U.S. Treasury reports, non-compete agreements impact about 30 million U.S. workers. Under Illinois law, non-compete agreements must be premised on a legitimate business interest and narrowly tailored in terms of time, activity and place.
Starting in January, the Illinois Freedom to Work Act will prohibit use of non-compete agreements for employees earning less than $13 an hour.
