Jimmy John's Serves Up Non-Compete Clause For its Low-Wage Workers
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December 2014
Jimmy John’s Serves Up Non-Compete Clause For its Low-Wage Workers
The “freaky fast” sandwich chain known as Jimmy John’s is gaining attention because it requires
many of its low-wage workers to sign non-compete clauses. Non-compete clauses restrict a
former employee from engaging in a similar type of employment for a certain timeframe within
a geographical boundary. Non-compete clauses, also known as covenants not to compete, were
traditionally reserved for professionals, high-level management and sales personnel, and the
most skilled workers. Today they are becoming more common as the dynamics of the labor-
management paradigm adapt to an economy geared towards mobility and flexibility, rather
than entrenched roles and loyalty. The increased inclination for employee mobility correlates
with the increased need for companies to be responsive to shareholder demands in addition to
withstanding volatile shifts in the market.
The implicit contract of a seemingly bygone era included the employer providing stability and
reliability in exchange for an employee spending his or her career with that company. This
model shone in the manufacturing industry, but this implicit contract was outsourced along
with those types of jobs, and instead replaced with explicit terms of a covenant not to compete.
Even though the traditional rationale was to defend trade secrets and shield a business’s
customer base, non-compete clauses have trickled down from the upper tiers of employment
to low-wage workers. The explicit terms of the new labor-management model safeguard the
employer’s investment in educating and training the workers, preventing them from leaving to
open a similar shop next door. However, the argument may become too attenuated when
applied to fast-food workers. Courts in some states do not uphold these covenants, deeming
them unfair to the worker and the public because of restricted competition. But the courts that
do uphold the covenants will assess the reasonableness of the clause based on the agreement’s
purpose, which must protect a legitimate employer interest, the geographical restrictions, and
the protected timeframe. See Hopper v. All Pet Animal Clinic, Inc., 861 P.2d 536 (Wyo. 1993).
Jimmy John’s non-compete clause restricts a former employee for two years after termination
from working for another company: 1) that is within three miles of a Jimmy John’s location; and
2) that does at least ten percent of its business making sandwiches. With the increasing number
of Jimmy John’s locations, and the inherent turnover rate within this industry, does Jimmy
John’s non-compete clause seem reasonable under the Hopper analysis? What legitimate
employer interest is jeopardized by the employment of a sandwich maker or delivery driver at a
competing business?
When the Guy Making Your Sandwich Has a Non-compete Clause
http://www.nytimes.com/2014/10/15/upshot/when-the-guy-making-your-sandwich-has-a-
noncompete-clause.html
1 Labor and Employment Relations Association (LERA)
www.LERAweb.org8 Reasons Why Small Businesses Should Use Non-Compete Agreements
http://www.tlnt.com/2012/06/05/8-reasons-why-small-businesses-should-use-non-compete-
agreements/
Hopper v. All Pet Animal Clinic, Inc., 861 P. 2d 531 - Wyo: Supreme Court 1993
http://scholar.google.com/scholar_case?case=4105784327858010219&q=hopper+v.+all+pet+a
nimal+clinic+inc&hl=en&as_sdt=6,47&as_vis=1
SCOTUS: Are Mandatory Security Screenings At Work Compensable?
The United States Supreme Court (SCOTUS) recently heard oral arguments in Integrity Staffing
Solutions, Inc. v. Busk, to determine whether time spent in mandatory post-shift security
screenings was compensable under the Portal-to-Portal Act. The petitioner, Integrity Staffing
Solutions, provides employees to many companies, but most notably the behemoth online
retailer Amazon. Workers at Amazon warehouses endure mandatory post-shift security
screenings to protect the employer from an all-too-common occurrence in the industry:
employee theft.
However, employees often face wait times of up to thirty minutes before they are screened and
allowed to leave the premises. In dozens of similar cases brought against the retailer, workers
are demanding to be paid for this waiting period since they are still on the worksite and not
permitted to leave. Under the Portal-to-Portal Act, only work is integral, indispensable, and
ordinarily performed during the work day is compensable.
As discussed in an earlier LER Law newsletter HERE, the Supreme Court recently held that
donning and doffing certain required work gear is not compensable under the Fair Labor
Standards Act. Pro-business supporters armed with this fresh 9-0 Supreme Court decision
adamantly oppose paying employees for time spent outside the scope of their employment
that is not integral or indispensable to their work. However, employee supporters retort that if
employees must remain on site until they are screened that is part of the regular workday and
thus should be compensable. Worker advocates argue that because the screenings are
designed reduce employee theft and thereby reduce overhead costs and prices, they are
integral and indispensable and thus the time should be paid. Both sides are highly motivated
given that more than $100 million in back wages is at stake for more than 400,000 employees.
Amazon Workers Take Security-Line Woes to Supreme Court
http://www.bloomberg.com/news/2014-10-06/amazon-workers-take-security-line-woes-to-
supreme-court.html
29 CFR 785.50 – Section 4 of the Portal-to-Portal Act
http://www.law.cornell.edu/cfr/text/29/785.50
2 Labor and Employment Relations Association (LERA)
www.LERAweb.orgAre Post-Work Security Checks Compensable? Integrity Staffing Solutions v. Busk
http://www.lexisnexis.com/legalnewsroom/labor-employment/b/labor-employment-top-
blogs/archive/2014/10/09/are-post-work-security-checks-compensable-scotus-and-integrity-
staffing-solutions-v-busk.aspx
UPDATE: On December 9, after this article was written, the Supreme Court, in a 9-0 decision,
concluded that the screening time was not compensable. The Court concluded that the
activities were not integral because they “were not an intrinsic element of retrieving products
from warehouse shelves or packaging them for shipment.” Nor were they indispensable
because the work could be done even if the employer eliminated the screenings. The Court
rejected the lower court’s test, which found the activities compensable because the employer
required them. The Court also rejected the argument of the employees that the employer
should pay because it could have reduced the amount of screening time to a minimal amount by
employing more screeners or staggering shifts and did not do so. See the decision HERE.
UBER Powerful: Is The Sharing Economy Rewriting The Rules on
Independent Contractor Status?
Recent exposés on the sharing economy have gained much attention, (HERE) as phone
applications provide every user with the potential to become a micro-entrepreneur. From
Airbnb, to TaskRabbit, the ever-evolving employment model is experiencing fresh perspectives
that highlight the difficulties in determining who is an employee, who is an employer, and who
is just “sharing” his or her services for a pre-determined fee.
Uber, the car-sharing services platform, has arguably been the most pronounced game-changer
in the highly regulated taxicab industry. New York City, along with other major metropolitan
areas, has experienced never-before-seen competition from a very unassuming and often
unorganized rival: regular people who have a car, need money, and value independence. Along
with revolutionizing the method of payment, the process of hailing a taxi, and the way we
perceive traditional transportation roles, the new industry rivals are also challenging a bedrock
employer-employment relationship known as independent contracting.
Uber drivers are considered “partners”, which is a catchy way of saying independent
contractor. Proponents of this type of employment relationship extol its benefits such as lower
overhead costs from not paying pensions or healthcare, ability to stay lean and adaptable to
changing markets, and the freedom to contract with those providing better services. But when
Uber unilaterally implemented changes to its vehicle categorization, which affected fee
arrangements, this independent-contractor relationship was thrust into unfamiliar territory
traditionally reserved for “regular” employees.
In a rare act of solidarity among independent contractors, thousands of Uber drivers
nationwide decided to strike. Going up against a company known for its bulldog approach to
dealing with transportation agencies, the uncommon amalgam of “partners” took to the streets
3 Labor and Employment Relations Association (LERA)
www.LERAweb.organd online forums to express their communal disgust in the unilateral changes. Pro-worker
advocates won a swift victory, forcing Uber to redact its unilateral policy implementation. While
employers often prefer to use independent contractors to avoid coverage of labor and
employment laws, in this case it did not protect Uber from what traditionally has been the
employees’ most powerful weapon – the strike.
Independent contractor ruling on FedEx drivers could affect "Sharing Economy"
http://www.bizjournals.com/sanfrancisco/blog/techflash/2014/08/independent-contractor-
ruling-fedex-uber-lyft.html?page=all
The Sharing Economy’s ‘First Strike’: Uber Drivers Turn Off the App
http://inthesetimes.com/working/entry/17279/the_sharing_economy_first_strike_uber_driver
s_turn_off_the_app
San Francisco Provides Dependability Through Legislation
In a landmark piece of legislation passed in late November, the San Francisco Board of
Supervisors provided the nation’s first legislative mandate requiring certain categories of
employers to give workers advance notice of schedules and schedule changes in addition to
providing part-time workers equal pay to their full-time counterparts. The legislation, referred
to as the “Retail Workers’ Bill of Rights” but officially known as “Fair Scheduling and Treatment
of Formula Retail Employees”, maintains that employers must give at least two-weeks notice to
employees of upcoming schedules. If the employer changes the schedule within seven days of
the upcoming shift, it must pay specified compensation to the affected employees. In addition,
the bill requires minimum pay for on call shifts when the employee is not actually required to
work.
In addition to scheduling requirements, the bill also upgrades the potential earnings of part-
time employees. It requires initial parity between part-time and full-time employees doing the
same work and also mandates that part-time workers receive the same promotional
opportunities and prorated paid time off as their full-time colleagues. Worker advocates across
the country laud this effort by the San Francisco Board of Supervisors as taking a politically risky
move in order to secure the necessary rights of an overlooked and underrepresented
demographic. Opponents of this legislation argue that it severely hampers an employer’s right
to contract, schedule, and pay its employees as it sees fit under current state and federal
employment laws. Pro-business advocates see part-time workers as a necessary function of a
market-based economy that needs to meet shifting and dynamic international demands.
According to the drafters of the trailblazing legislation, the goal is to build a sturdy foundation
for retail workers given that many of them juggle multiple part-time jobs with the responsibility
of raising a family, attending school, or even both. Even though the legislation is far-reaching, it
only applies to “formula retail establishments” with twenty or more employees in San Francisco
in addition to twenty or more locations throughout the world. The ordinance is estimated to
4 Labor and Employment Relations Association (LERA)
www.LERAweb.orgaffect about 30,000+ employees, and a little more than ten percent of the retail chains in the
city.
As the article below indicates, some states and localities have followed the lead of California
municipalities on minimum wage and paid sick leave. Will they follow this trend as well?
Ordinance Text: Fair Scheduling and Treatment of Formula Retail Employees
http://op.bna.com/dlrcases.nsf/id/rsmh-9r8stz/$File/San Francisco Ordinance-Amended-
111814.pdf
The People's Republic of San Francisco is Now Micro-Managing Employee Schedules
http://www.economicpolicyjournal.com/2014/11/the-peoples-republic-of-san-francisco.html
If you have a subscription to Bloomberg’s Law Daily Labor Report:
http://www.bloomberglaw.com/search/results/b27022933ecfb5ac692069164e08ac65/docume
nt/X43A7908000000?search32=C9P6UQR5E9FN6PB1E9HMGNRKCLP6QFAJC5N20HJIC5N66QBJ
CDNJMEREDTFMIRBGBTO6GSJ1EDIN6F9H7CTMCQBOBTH6URRCBTONAPBIF4UJ2
Election Surprise: Red States Pass Minimum Wage Increases*
In one of the surprising results of election night in November, four traditionally Republican
states passed ballot measures increasing the minimum wage. By significant margins, voters in
Alaska, Arkansas, Nebraska and South Dakota adopted laws raising the minimum wage. Voters
in the blue state of Illinois passed an advisory referendum urging the legislature to increase the
minimum wage, while at the same time electing a Republican governor. In a state like Alaska,
the high cost of living may have influenced voters, but that does not explain the outcome in the
other states. After all, Republicans have traditionally opposed increases in the minimum wage
and most continue to do so.
With the addition of these four states, 29 states will have a higher minimum wage than the
federal in 2015 and many are indexed to rise with inflation. As the minimum wage movement
grows from blue into red states, a move to mandate paid sick leave has begun in some
traditionally blue localities and a few states. Massachusetts voters supported a referendum
that made the state the third to require paid sick leave for workers, with the highest
requirement yet, 40 hours per year. This movement too could continue to spread, with
organizations in many states already pushing for legislation.
These results suggest that the widespread public demonstrations are drawing public attention
to serious inequalities. Further they also affirm the effectiveness of worker advocacy at the
state and local rather than federal levels. There is some force to the argument that minimum
wages should track local cost of living and therefore might vary by jurisdiction. At the same
time, local and state employment laws make it more difficult for employers who have
operations in more than one jurisdiction to comply with varying laws and standards.
5 Labor and Employment Relations Association (LERA)
www.LERAweb.orgThe success of these initiatives is likely to spur campaigns in other places. Further it may also
encourage continued use of strikes and demonstrations by low wage workers to draw attention
to these important issues. The December 2014 strikes show the growth of this movement, not
only in the number of demonstrators involved but also in the categories of employee
participation, which now include fast food workers, convenience store employees, dollar store
employees, home care workers, and airport workers.
* This article was derived from a post first published on the American Constitution Society blog.
For more, see
2014 Minimum Wage Ballot Measures
http://www.ncsl.org/research/labor-and-employment/minimum-wage-ballot-measures.aspx
State Minimum Wages
http://www.ncsl.org/research/labor-and-employment/state-minimum-wage-chart.aspx
State and Local Action on Paid Sick Days
http://www.nationalpartnership.org/research-library/campaigns/psd/state-and-local-action-
paid-sick-days.pdf
Editor: Co-editor:
Ann Hodges Dillon Taylor
University of Richmond J.D. Candidate, 2016
School of Law University of Richmond
28 Westhampton Way School of Law
Richmond, VA 23173 28 Westhampton Way
Richmond, VA 23173
6 Labor and Employment Relations Association (LERA)
www.LERAweb.orgYou can also read
