The Wall Street Journal today reported on two cases of employers in two different states (New York and Illinois) who are being investigated for illegal/unfair conduct because they required their junior/entry-level employees to sign non-competition clauses in their employment agreements. The cases involve Law360, an online legal/court news reporting service owned by Lexis-Nexis, and Jimmy Johns, a sandwich restaurant chain. Prior to recent events, Law360 and Jimmy Johns insisted that all newly-hired employees sign agreements restricting their ability to work for a competitor: in the case of Law360, employees were not allowed to work anywhere in legal news for one year, and in the case of Jimmy Johns, sandwich makers were prohibited to work for any competing restaurant within a three-mile radius for a period of two years.
The Public, Press, and Attorneys General Question Restrictive Covenants
Both employers encountered bad publicity and blowback, with employees and customers (see “Postscript”, below) wondering why those companies would find it necessary to restrict restaurant employees and entry-level reporters from switching jobs. (New York Times, Slate Articles). Both employers also faced investigatory scrutiny from the Attorneys General of New York and Illinois, who inquired as to whether the restrictive covenants violated state laws. Not coincidentally, both employers quickly declared that they would not enforce those provisions against their current or former employees.
Finally, in an example of delicious irony, Law360 itself recently reported on significant developments in the non-competition legal arena, including a statement against such agreements issued by the Obama Administration. Now, I wonder how it will report on news of its own settlement with the State of New York, under which it has agreed to not require new employees to sign non-competes, as well as to refrain from enforcing any existing non-compete restrictions still in effect.
Postscript: Jimmy John’s Hunger Strike
Our colleague, Michael Gan, continues his Jimmy John’s “hunger strike” into its ninth month.