Regular readers know that a good part of my practice deals with the use of “post-employment restrictions” to prevent former employees from using, selling or distributing a company’s most valuable assets – its intellectual property. In one of my first blog posts on this site, I commented that the “explosion” of litigation in this area has been one of the biggest surprises to me (and I suggested a few steps manufacturers could take to appropriately protect their interests). See “I’m New – And It’s No [Trade] Secret” (Oct. 27, 2014).
Now, the head government lawyers in ten states and the District of Columbia have notified seven (7) national quick dining restaurant chains of an apparently coordinated investigation into the use of agreements to inappropriately restrict employees from seeking better paying jobs. See Letter. While heralded as an investigation into the use of so-called “No Poach” Agreements (agreements between competitors not-to-hire the employees of one another), the definition of “No Poach” agreements include any written agreement (including confidentiality agreements, no solicitation agreements, and non-compete clauses) used to limit employee mobility.
The language used in the letter (notably use of the phrase “our offices” and “we,” along with an assertion of their “common interest”) seems to indicate a coordinated, multi-state investigation. Media reports identify the targets of the investigation are: Arby’s, Burger King, Dunkin’ Donuts, Five Guys Burgers and Fries, Little Caesars, Panera Bread, Popeyes Louisiana Kitchen and Wendy’s. See Article by Courthouse News.
This multi-state investigation is just the latest probe into Jimmy John’s use of employment agreements to restrict the hiring of workers. In January 2018, Jimmy John’s was hit with a purported class action challenging the broad use of post-employment restrictions. Butler v. Jimmy John’s Franchise, LLC et al, No. 18-cv-133 (D. Ill) (January 2018). Jimmy John’s has filed a motion to dismiss the complaint (a motion which remains pending) but the court denied its request to hold off on discovery until the motion was decided.
One thing seems clear, the use of post-employment restrictions by manufacturers and others likely will draw increasing scrutiny in the months and years ahead. Readers may wish to confer with legal counsel to make sure they do not become the next target.