Defeat of the Non-Compete
When I was in high school, I worked part-time at a clothing store that had a fantastic employee discount. How great would it be, high-school-me mused, to capitalize on employee discounts at all my favorite stores by getting several jobs at the mall. There was only one problem: when I started my job at the store, I entered into a non-compete agreement. I agreed not to work at any of the store’s competitors while employed at the store and for a period thereafter. The store sold clothes for teens and young adults; its competitors were the likes of Abercrombie & Fitch, Hollister, Pac-Sun, and almost every other store I shopped at as teenager.
Last week the Obama administration urged states to ban non-compete agreements that prohibit workers from going to work for their employer’s competitors. It’s easy to understand the rationale behind non-competes when it comes to high-level executives or employees with knowledge of a business’ proprietary information, but some businesses have been using non-competes far more broadly.
For example, in 2014, Jimmy John’s was sued for a requiring its sandwich artists to sign expansive non-compete agreements. The non-compete stated that Jimmy John’s sandwich makers could not work at any of the chain’s competitors for two years following employment. Jimmy John’s considered itself to have many competitors: Subway, Quizno’s, and any business that derived at least 10 percent of its revenue from selling sandwiches and was located within three miles of any Jimmy John’s store. The case ultimately settled and Jimmy John’s dropped the non-compete clauses.
The administration asked states to ban non-compete agreements that target low-wage workers and other employees who do not have access to trade secrets or proprietary company information that could be exploited for a competitor’s benefit.
Washington State has not yet banned non-competes, but employers that use non-competes should have the agreements evaluated for enforceability. We’ll follow this issue and keep you informed of any updates.