The headline was certainly eye-catching: "When the Guy Making Your Sandwich Has a Noncompete Clause." Most people think of noncompete clauses in employment agreements involving highly paid executives, project designers, engineers, and trained sales staff. But do noncompete clauses apply to nonprofessionals?
Yes it is true. Workers at Jimmy John's are required to agree not to work for any business which derives more than 10 percent of its revenue from selling, which include sandwiches. The restriction is for two years after leaving employment and covers a three-mile radius of any Jimmy John's location. In each of 44 states, this translates to a 6,000 square mile blackout.
The facts of the case
In this case, as a part of an agreement to sell their company, the defendants agreed "for a period of eighteen (18) months following the termination of ... employment for any reason, ...will not engage in any activity that is or is intended to be, directly or indirectly competitive with those aspects of the Company business[.]" CDI was in the business of providing goods and services in the areas of signs, portable exhibits, custom exhibits, and trade show services. Another company, ABC Signs, was a direct competitor with CDI in the sign business and ultimately hired the defendants with the idea to expand into the portable sign and custom exhibits market. CDI, seeking to prevent ABC from competing in this area of their business, sought to enforce the noncompete agreement.
The law as it applies
In deciding whether the agreement was in fact enforceable, the court laid out the general premise that agreements prohibiting competition are only valid to the extent they protect legitimate business interests; and to the extent that they do not place an unreasonably restraint upon the employee's ability to engage in an occupation or profession. The Connecticut Supreme Court has identified five factors to consider when deciding when a noncompete agreement is enforceable: (1) the length of time of the restriction; (2) the geographical area covered; (3) the fairness of the protection accorded to the employer; (4) the extent of the restraint on the employees opportunity to pursue an occupation; and (5) the extent of interference with the public's interest.
The court found that the CDI agreement was improper when considering the third and fourth factors. CDI did not require similar agreements with other employees even though in the past a number of employees have jumped ship and gone to work for competitors. With regard to the test for reasonableness, the court found the agreement overly broad; the test was not whether the defendants would be able to make a living in other ways, or in other occupations, but whether or not the agreement as written and applied would unfairly prevent their "opportunity" to pursue their occupation. The court found it did for no other reason than to stifle competition.
Seeking experienced legal representation
As the court noted, the facts relating to the specific sign industry were critical to the court's determination, and underscores the need for experienced legal counsel in both drafting noncompete agreements and efforts to enforce them.