question archive 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
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
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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. 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.” 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.
Critical Thinking:
1.What are non-compete agreements and how are they used in the employment setting?
2. What are the ethical considerations of non-compete agreements for the employee? The employer?
3. Other than being punitive, what purpose do non-compete agreements serve when low-level employees are required to sign them?
4. 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?
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ANS 1
Non-compete agreements are binding agreements between employers and employees. The promise of an employee not to enter into any competition or work under any industry or organization that is in competition with the employer during or after the employment.
The organizations include non-compete provisions in employment contracts, that will restrict the employee from joining any competitive firms for a specified period of time, to safeguard against leakage of trade secrets. The relationship of the organization with its suppliers and customers will remain intact even after the termination of the employee.
ANS 2.Ethical considerations of non compete agreements for the employer:
The non-compete agreement protects the company secrets and confidential information related to core competencies, strategic plans, and procedures. The learnings and experiences of the employee in the organization cannot be used for economic gain by any other competitive organization.
Ethical considerations of non-compete agreements for the employee:-
In return for the promise in the agreement, the employee will get some additional benefits like promotion or incentive. The employee can use this agreement as a salary negotiating tool.
ANS 3 The effect of Non -compete agreement can be punitive when applied to low-level employees. Low-level employees do not have any approach to any such sensitive or confidential information which may risk the existence of the company. The company also does not bear any huge cost after the training for these employees. . Hence the company has nothing to lose if such employees enter any competitive firm. But from the employee's perspective, these employees have limited skills which they can use in a particular type of job only in a similar industry. Hence binding low-level employees with non-compete agreements will limit job opportunity
ANS 4. Senior executives like an executive chef or vice president of Jimmy's John or any other organization have the access to vital company information, which if passed to the competitors can make the status of the present company vulnerable. Hence, they should be compelled to wait for a certain negotiated period before working for any competitive firm. The senior executive may sell confidential information to competitors for personal gains. The competitor firm can lure the suppliers and customers of the company using this information, copy the core competencies of the firm, and practice unfair business practices.
