Nel's New Day

December 5, 2014

Poorly-paid Workers Forced into Non-Compete Agreements

The possibility of an increase in minimum wages has attracted the ire of many conservatives in the United States. President Obama was threatened with lawsuit after he issued an executive order that employers with federal contracts would be required to pay a minimum of $10.10 per hour.

While the federal government refuses to act, however, other places have taken action. In the most recent election, five states—four of them considered red—approved raises to the minimum wage. In addition to Alaska, Arkansas, Illinois, Nebraska, and South Dakota, counties in Wisconsin and two California cities, San Francisco and Oakland, passed ballot proposals to increase the wage.

Employee protests throughout the country are also demanding $15 per hour. Last September, more than 400 people were arrested in nonviolence civil disobedience in 150 cities.

The pittance that wealthy corporations pay their employees is egregious, but it doesn’t match the practice of some employers—that employees sign a mandatory non-compete agreement to be hired. Traditionally this action has been used for CEOs or people with highly specialized skills and knowledge. The purpose of a non-compete clause is to keep the employee from taking confidential knowledge or trade secrets to another business for a specific length of time. Some states ban non-compete clauses, but in other states, businesses are demanding these for minimum-wage employees.

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If you get a sandwich at one of the 2,000 Jimmy John’s sub sandwich restaurants, your server may have a non-compete clause, as does the person who made the sandwich. Top executives can negotiate their non-compete clause in a contract; a minimum-wage worker is so desperate to get a job that they have to agree. Fired top executors are likely to be paid for the time of the clause; fired minimum-wage workers are out on the streets without any right to get a similar job.

Jimmy John’s requires that workers agree to not work on any of the chain’s competitors for at least two years after employment at Jimmy John’s. The agreement’s definition of “competitors” is quite broad:

“Employee covenants and agrees that, during his or her employment with the Employer and for a period of two (2) years after … he or she will not have any direct or indirect interest in or perform services for … any business which derives more than ten percent (10%) of its revenue from selling submarine, hero-type, deli-style, pita and/or wrapped or rolled sandwiches and which is located with three (3) miles of either [the Jimmy John’s location in question] or any such other Jimmy John’s Sandwich Shop.”

The area in which employees could not work covers 6,000 square miles in 44 states and the District of Columbia. For example, a student who worked at a Jimmy John’s in Illinois during high school could not work almost anywhere in Tuscaloosa serving sandwiches—including a school cafeteria–when he attended the University of Alabama.

One reason for the non-compete clause would be to prevent any dissent among workers who would be less likely to attempt to unionize if they knew they could not get another job after being fired. For example, Erik Forman and five other workers were fired from a Minneapolis Jimmy John’s over three years ago for trying to unionize their store. Originally the workers brought lawsuits claiming that the company forced employees to work off the clock but amended the suit to argue that the non-compete agreement is overly broad and “oppressive” to employees.

One of the employees forced to sign the agreement was an assistant store manager, the other a delivery driver and assistant store manager. Forman, who graduated from Macalester College, couldn’t find a job while the case was being appealed. Another fired worker, a graduate of the University of Minnesota, went ten months without a job after he was fired from Jimmy John’s, where he made $7.50 an hour, before he found another low-paying job in the retail industry.

The issue for creating a union was the company’s sick-day policy. Workers were required to find their own replacements if they called in sick, and they didn’t get paid for the time. If they couldn’t find anyone to fill in, the company assigned them demerits.

Over two years ago, a federal judge ordered MikLin Enterprises, which owns 10 Jimmy John’s franchises, to reinstate the six workers with backpay, but the case dragged on for over two years. Last August, the National Labor Relations Board ruled that Jimmy John’s had violated the National Labor Relations Act by firing the workers and ordered them reinstated. MikLin is considering its “options.”

A former Subway manager has accused her earlier employer of trying to block her from starting a new job at another sandwich shop. The woman signed an agreement in 2009.

In Bellevue (WA), Benny Almeida faced the same issue when, desperate to get a job, he took a $15 an hour position as a water-damage cleanup helper. Three months after he started with ServiceMaster of Seattle, he was offered a job with another firm for $18. The non-compete agreement that he had signed covered King, Snohomish, Island, Yakima, and Kittitias counties—a rather large area. The clause meant that he also was prevented from working for two years in any water- or fire-damage job, janitorial, office cleaning, window washing, floor or carpet cleaning or other job ServiceMaster does. ServiceMaster said the clause was for the training, but Almeida said he didn’t get any. He thought the clause applied to managers high enough to have client lists or leave to start competing businesses.

The non-compete clause is just one way in which employers abuse their employees. Workers at an Amazon warehouse in Nevada aren’t paid for the time that they wait to be screened at the end of their workdays while the company makes sure they have not stolen any goods. FedEx workers are “independent contractors,” according to the company, and therefore don’t have benefits, reimbursements of incurred costs, and overtime. Retail workers are assigned inconvenient schedules that change at the last minute, meaning that they cannot make any plans including college classes. They can even be sent home if sales are slow but have no right to deal with family members who become ill.

The entire issue boils down to questions of ethics and economics. Big business claims that they can’t afford to treat employees on a higher level than medieval serfs, but a few large companies, including Costco, Whole Foods, and In-N-Out Burger, have found that treating their employees like human beings has been good business.

Unfortunately for Jimmy John’s, negative publicity has brought to light the ridiculous practice of non-compete agreements for poorly-paid employees. Thirty-seven congressional members are requesting an investigation by the Federal Trade Commission and the Department of Labor.

One element that courts examine in determining the validity of a non-compete agreement is whether it is necessary to protect the employer’s legitimate business interests instead of merely restricting the worker’s ability to find another job. A recent Kentucky Supreme Court ruling in Creech, Inc. v. Brown ruled that continued employment with no other reasons is insufficient to justify the agreement. Big corporations may lose their ability to use this unreasonable method of control over employees.

Those who object to Jimmy John’s non-compete agreement may want to sign a petition opposing the requirement for workers.

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