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Jimmy John's drops noncompete clauses following settlement

Jimmy John’s sandwiches
Source: Jimmy John’s

Jimmy John's is about to make some major changes to its employee contracts.

The Illinois-based sandwich chain has agreed to stop including noncompete agreements in its hiring documents, a practice that was deemed "unlawful" by the New York attorney general's office.

The announcement follows an investigation by that office into Jimmy John's use of noncompete agreements with franchisees in New York, which began in December 2014. The agreements had barred departing employees from taking jobs with competitors of Jimmy John's for two years after leaving the company and from working within two miles of a Jimmy John's store that made more than 10 percent of its revenue from sandwiches.

"Noncompete agreements for low-wage workers are unconscionable," Eric Schneiderman, New York's attorney general, said in a statement. "They limit mobility and opportunity for vulnerable workers and bully them into staying with the threat of being sued. Companies should stop using these agreements for minimum wage employees."

In a statement, Jimmy John's said, "We are pleased to have reached an agreement with the New York Office of the Attorney General (OAG) to resolve its inquiry regarding the use of noncompete agreements by Jimmy John's franchisees in the State of New York. We worked closely with the OAG and provided assurances that, as a franchisor, we would not support the enforcement of a franchisee's noncompete agreement against an in-store employee."

The chain said it also agreed to inform its New York franchisees that these agreements "are disfavored by New York law and that the OAG believes that those franchisees should void any such agreements."

Earlier this month, the Illinois attorney general's office filed a lawsuit against the sandwich company due to its noncompete agreements.

According to The Wall Street Journal, the company had stopped issuing sample agreements to franchisees in 2014. Franchisees who implemented the agreements have agreed to void all past agreements, according to a statement from New York's attorney general.