Early this summer Jimmy John's was named as the defendant in two class action lawsuits accusing the company of wage theft practices. Specifically, the complaints allege that Jimmy John's has "intentionally and repeatedly misrepresented the true time worked by their employees" to keep costs low and dodge overtime laws. Two former employees stated that Jimmy John's managers frequently clock-out employees at the end of the day regardless of whether they have completed their closing duties. This practice is exacerbated by the fact that managers' bonuses are directly tied to whether they hit their labor cost targets.
Last month, one of the complaints was amended to include the non-compete agreement that most Jimmy John's employees sign. The amended complaint asserts that the non-compete agreement is overly broad and oppressive. In part the agreement states:
Employee covenants and agrees that during his or her employment with the Employer and for a period of two (2) years after . . . he or she will not have any direct or indirect interest in or perform services for . . . any business which derives more than ten percent (10%) of its revenues from selling submarine, hero-style, deli-style, pita and/or wrapped or rolled sandwiches and which is located within three (3) miles of either [the Jimmy John's location in question] or any such other Jimmy John's Sandwich Shop.
Kathleen Chavez, the attorney handling the case, stated that her two clients were required as a condition of their employment to sign the aforementioned non-compete covenant. She further indicated that, if enforceable, the covenant would effectively cover an area of roughly 6,000 square miles in 44 states and the District of Columbia.
The covenant is allegedly a part of the standard employment package provided by the Jimmy John's corporate office. The decision to require individuals to sign the agreement as a condition of their employment is said to be within the discretion of the individual franchisees. Since the news of the pending lawsuits, many shop owners have pulled the covenant from the hiring package. Additionally, as of now there is no indication that Jimmy John's has ever tried to enforce the language of the non-compete covenant.