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Yes, Hourly Workers Can Have Noncompete Clauses Too

You may think that noncompete clauses are reserved for high-salaried employees and executives, but they can be used for hourly workers too.

Take employees of the sandwich chain Jimmy John's, for example. In an employee agreement obtained by The Huffington Post, it seems at least one Jimmy John's franchisee in Illinois prevents its workers from working at any business that makes a dime on selling subs... for two years after employment!

Its understandable that business owners don't want their employees leaving to support the competition, but how far can these noncompete agreements go?

Reasonable Noncompete Agreements

Noncompete agreements are a reality in today's workforce, and they need very little to be enforceable. Even if your workforce is paid minimum wage by the hour, a noncompete agreement may keep them from working for the competition if:

  • The agreement is in exchange for something. Typically as part of the employment contract, the agreement not to compete is in exchange for being hired. If you want to impose this restriction on an existing employee, he or she must obtain some sort of consideration (e.g., a raise, a promotion, benefits, etc.)
  • It is supported by a business purpose. You can't simply want to punish employees for leaving. Employers need to have a business interest in making sure their workers don't immediately jump ship. Good reasons may include protecting trade secrets or proprietary information.
  • The restriction is reasonable in scope. You may be able to impose a worldwide restriction on a former employee seeking new employment, but odds are you'll be limited to the area affected by your business or industry. Same goes for time restrictions, and up to a few years may be reasonable.

So Why Does a Noncompete on Hourly Workers Seem Cruel?

Well, because most businesses which employ entry-level hourly workers probably don't have a serious business interest in letting these low-level workers work for the competition. The Jimmy John's franchisee in Illinois may have a good reason for preventing its employees from working for any sub shop within "three (3) miles" of any Jimmy John's, but if someone challenges the legality of that clause, a court may have to decide.

So employers should use their common sense, and think about how to strategically use noncompete clauses, if at all, for hourly workers.

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