Illinois attorney general sues Jimmy John's over non-compete agreements

(Reuters) - The attorney general of Illinois on Wednesday filed a lawsuit claiming fast-food franchise Jimmy John’s unlawfully requires its low-wage workers to sign agreements barring them from working at other sandwich shops in wide swaths of the country.

In the lawsuit filed in Cook County Circuit Court, Attorney General Lisa Madigan said the use by Jimmy John’s Enterprises LLC and Jimmy John’s Franchise LLC of the non-compete agreements is both illegal and “unconscionable.”

“By locking low-wage workers into their jobs and prohibiting them from seeking better paying jobs elsewhere, the companies have no reason to increase their wages or benefits,” Madigan said in a statement.

According to the lawsuit, Jimmy John’s has “no legitimate business interest” to warrant the non-compete agreements on shop employees and assistant managers.

Jimmy John’s, which is based in Illinois, did not immediately return a request for comment. The company has 274 stores in Illinois and more than 2,000 nationwide, according to the lawsuit.

Requiring white-collar workers to sign non-compete agreements is not unusual, and frequent legal battles over the validity of such agreements focus on the length of time they are in effect and their geographical limits. But the pacts are almost unheard of in fast-food and other service industries.

The Jimmy John’s agreement prohibits workers during their employment and for two years afterward from working at any other business that sells “submarine, hero-type, deli-style, pita, and/or wrapped or rolled sandwiches rolled sandwiches” within two miles of any Jimmy John’s shop in the United States, according to the lawsuit. An agreement in effect from 2007 to 2012 extended the bar to three miles.

Democrats in the U.S. Congress in 2014 asked the U.S. Department of Labor and other agencies to investigate Jimmy John’s non-compete agreements. Months later, New York Attorney General Eric Schneiderman said his office had requested information from Jimmy John’s and a number of its New York franchises on the agreements, but he has not announced any action.

The Illinois lawsuit seeks a court order that the agreements are unenforceable and void. Madigan said in a statement that her office is investigating other companies that require employees to sign similar agreements.

The case is the People v. Jimmy John’s Franchises LLC, Circuit Court of Cook County, Illinois, No. 2016-CH-07746.

Reporting by Daniel Wiessner in Albany, New York; Editing by Alexia Garamfalvi and Leslie Adler