Most company executives and mid-level managers are expected to sign non-compete agreements as a condition of their hire or continued employment. It's a reasonable expectation to prohibit their leaving the company with pilfered recipes or trade secrets or from siphoning off top-tier clients for their new venture.
But not all non-compete clauses will stand up under legal scrutiny, as one sandwich-maker learned a few years ago.
The curious case of Jimmy John's
Although it was usual and customary to require signed non-compete agreements from higher-level corporate employees, it was indeed a rarity to ask the same of minimum wage employees.
Enter Jimmy John's. The sandwich chain made all employees sign extremely restrictive non-compete agreements that included clauses prohibiting them from working for a competitor within two years of their separation of employment with Jimmy John's. Even more baffling, they were also barred from working for any companies within two miles of any Jimmy John's if said companies derived over 10% of their revenues from sandwich sales.
That agreement was signed by sandwich makers and delivery drivers who were paid only minimum wage. In small towns where fast-food joints were the only employers that were hiring, it pretty much shut down the former workers' employment possibilities.
Court challenge prevailed
Another state took the sandwich-maker to court on the grounds that they were not lawful under the circumstances. They prevailed, and the company changed its hiring practices accordingly.
Is the non-compete you signed legally valid?
Companies have the right to protect their own interests with non-compete agreements. But employees have rights to that also must be well-served by the agreements. Companies know that many current and former employees will be intimidated by the expensive prospect of fighting it out in court against a corporate entity.
While they may include whatever language in their agreements, to be enforceable, the non-compete agreements must:
- Include consideration. For new hires, it is implied that the consideration is the job.
- Protect the company's interests. For example, doctors in practice with a medical group may be prohibited from taking patients with them if they leave.
- Be realistic and reasonable. Here is where Jimmy John's erred. Workers must not suffer undue burdens to be able to continue working in their chosen fields.
Do you have legal recourse to challenge a non-compete?
You certainly might. Addressing the matter with a knowledgeable Denver employment law attorney can clarify your situation and provide you with some answers.