The sandwich chain Jimmy John’s, whose sandwiches I am fond of, apparently requires all employees to sign non-compete agreements. Non-compete agreements are reasonable and appropriate in some circumstances, and I have written many of them. But for a non-compete to be enforceable, an employer must have a legitimate interest to protect. Employers have such an interest as to people with access to trade secrets or customer lists. They generally don’t as to people who tend cash registers and make sandwiches.
Details vary from state to state, but when a non-compete is not backed up by a legitimate employer interest, courts will generally refuse to enforce it. Thus, I would be surprised if Jimmy John’s agreements were generally held unenforceable. Even so there’s often no penalty for an unenforceable agreement other than the unenforceability itself. That is, there’s no fine or other disincentive for having required the non-compete. Plus, some people may mistakenly believe the non-compete is enforceable and forbear from doing things they have a legal right to do. So Jimmy John’s may gain more than it loses when it imposes unenforceable non-competes. As a caveat, some states may have consumer-protection or other laws penalizing imposition of unenforceable terms in adhesion contracts (a subject for another day).
Summing the situation up, imposing the non-competes may be within a broad reading of Jimmy John’s legal rights, and it will often be cost effective. But is it ethical? I think not. It’s an attempt to deceive employees regarding their legal rights and obligations. I’ll remember this the next time I have a yen for a Jimmy John’s sandwich.
See also Kevin Drum’s take on the issue.