Non-compete agreements and the fact that they are frequently abused have been a newsworthy topic in the last few years. In a previous blog post, I discussed the negative reaction to Jimmy John’s Gourmet Sandwiches restricting its sandwich-makers from working for competitors through non-compete agreements. Our blogs have also discussed the enforceability of Jimmy John’s non-competes under Georgia Law and a congressional bill that was introduced following the Jimmy John’s situation.
Well, apparently Jimmy John’s is not the only fast-food chain or fast-casual restaurant to try to restrain its workforce. Reports surfaced recently that a number of restaurants are being investigated for using agreements that restrict employees of one franchisee from working for other franchisees. Indeed, a group of state attorney generals have launched an investigation into this practice. The restaurants being investigated are a who’s who of fast-food and fast-casual restaurants, including: Burger King, Wendy’s, Arby’s, Panera, Dunkin’ Donuts, Five Guys, Little Caesars and Popeyes Louisiana Kitchen. McDonald’s and Chick-fil-A are not on the list, so Ronald McDonald and the Chick-fil-A cows must support employee mobility.
It appears these restaurants require a franchisee to agree in the franchise agreement that it will not poach or hire another franchisee’s employees. While not a true non-compete, this practice still significantly impacts low-wage fast food workers’ ability to pursue other job opportunities available in the marketplace. It may also have antitrust implications.
Many states have recently implemented laws that limit the types of employees who may be subject to non-competes. As this blog discussed, Massachusetts’ new non-compete law imposes such limitations. These laws will hopefully go a long way toward curbing the abuse of non-competes which we now know is pervasive – even in the fast food industry.
Neal Weinrich knows noncompetes and trade secrets inside and out. A shareholder at Berman Fink Van Horn, Neal counsels clients in all industries on matters involving restrictive covenants, trade secrets and other competition-related issues.
