Class action filed against Jimmy John’s over non-competes

Posted on: January 30th, 2018 by Steve Larson
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Jimmy John’s is a sandwich food chain. It requires franchisees to sign non-solicitation and no-hire agreements that prohibit franchisees from recruiting employees from other Jimmy John’s franchises. The agreements provide that if the provisions are violated, Jimmy John’s may impose a $50,000 penalty, or terminate a franchisee’s franchise agreement entirely.

A former employee in Illinois, where Jimmy John’s is based, has filed a putative class action in Illinois federal court alleging the practice of requiring the execution of non-solicitation and no-hire agreements between franchisees is a violation of federal and state antitrust laws. The complaint alleges that the $50,000 fine for violating the no-hire and non-solicitation agreements is more than 140 percent of the 2017 Jimmy John’s initial franchise fee, and if a franchise were terminated, the agreements provide that Jimmy John’s could impose up to three years’ worth of restaurant royalties as “liquidated damages.”

Jimmy John’s was previously sued by the attorneys general of Illinois and New York in separate cases that sought to end its practice of forcing employees to sign non-compete agreements prohibiting them from working at another sandwich shop within 12 months of the end of their employment with Jimmy John’s. Those actions did not address the non-solicitation and no-hire agreements.

The complaint alleges: “As part of its system to maintain its significant competitive advantage, Jimmy John’s franchisees, at the direction of and with the assistance of Jimmy John’s itself, have together colluded to suppress the wages and employment opportunities of the restaurant-based employees who work at Jimmy John’s franchise locations throughout the United States.”

The case is Butler v. Jimmy John’s Franchise, LLC et al., case number 3:18-cv-00133 in the U.S. District Court for the Southern District of Illinois.