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Until recently, Jimmy John’s required new hires to sign non-compete agreements that prohibited former employees from working, for a period of 2 years following the end of their employment, at a new company within a 2-mile radius of a Jimmy John’s restaurant that made more than 10 percent of its revenue from sandwiches. Jimmy John’s recently reached a $100K settlement with the Illinois attorney general’s office and a similar agreement with the state of New York to discontinue the practice and void previously executed non-compete agreements.

A growing number of legal actions disfavor non-compete agreements and even outlaw some language that had historically been acceptable. For example, a new Illinois law that took effect January 1, 2017, prevents employers from using non-compete agreements with employees who earn less than $13 per hour.

In light of non-compete agreements’ negative outlook, consider the following tips before crafting your next agreement:

  • What is your goal? If it’s simply to protect company secrets, a well-crafted confidentiality agreement will probably meet your needs.
  • Avoid using the same non-compete agreement for every employee. Sales employees should have a different version than key employees in operations.
  • The “consideration” given to an employee (e.g., 1 month pay signing bonus) needs to be significant enough for courts to enforce the agreement.
  • Avoid using overly restrictive language including overly aggressive geographic limitations and lengthy time periods. Agreements with post-employment restrictions less than 1 year are more likely to survive a legal battle.

With the ever-changing legal landscape, contact Employco for more details and guidance on recommended employee documents and company policies.