Capicola Confidential: Secrets of the Sandwich-Maker Revisited
Six years ago, I wrote Capicola Confidential: Secrets of the Sandwich-Maker on my personal blog. At that time, it was widely reported that a large chain of sub shops required its hourly workers to sign non-compete agreements, prohibiting its employees from working for a competitor for two years after leaving employment. According to the New York Times story cited in my post at the time, this was not really all that uncommon, as more and more employers require low- and moderate-wage workers to sign these agreements, prompting introduction of a bill in Congress to ban the use of non-compete agreements for some workers. Congress has yet to act.
Fast forward to this past Friday. President Biden issued a sweeping executive order aimed at promoting competition and removing barriers that stymie economic growth. Among other things, the order attempts to make it easier for employees to change jobs and helps to raise wages by banning or limiting non-compete agreements.
Section 5(g) of the order directs the Chair of the Federal Trade Commission to “consider working with the rest of the Commission to exercise the FTC’s statutory rulemaking authority under the Federal Trade Commission Act to curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.”
According to the Fact Sheet issued by the White House:
Competition in labor markets empowers workers to demand higher wages and greater dignity and respect in the workplace. One way companies stifle competition is with non-compete clauses. Roughly half of private-sector businesses require at least some employees to enter non-compete agreements, affecting some 36 to 60 million workers.
We seem to be a long way away from any FTC rulemaking or enforcement actions that may have an impact on use of non-compete agreements. However, in New York, it is very unlikely that a court would enforce a non-compete agreement to prevent a sandwich-maker or any other low- or moderate-wage worker from working for a competitor.
In New York, non-compete agreements are more common among professionals, executives, and higher-paid salespersons with access to confidential business-related information. And, even in those situations enforcement is not a given. In one recent local case, the court declined to enforce a covenant signed by two anesthesiologists. [See Are Physician Non-Compete Covenants Enforceable? (discussing Westside Anesthesia Associates of Rochester, LLP v. Anesthesia Associates of Rochester, P.C. (Sup. Ct. Monroe County 2019 [Index No. E2019007444])].
Restrictive covenants in employment—also referred to as non-compete clauses—are generally not favored, and will be enforced by the courts only to the extent they are reasonable and necessary to protect legitimate business interests, such as the protection of an employer’s trade secrets or confidential customer lists, or protection from an employee whose services are unique or extraordinary.
Courts have also held that employers have a legitimate interest in preventing former employees from exploiting the goodwill of a client or customer, which had been created and maintained at the employer’s expense, to the employer’s competitive detriment.
What legitimate interest would a sandwich chain have to justify preventing one of its sandwich-makers from leaving and working for a competitor? There probably isn’t one that a New York court would recognize as legitimate.
One of my real passions is defending employees accused of violating non-compete agreements. Even though we are typically the underdog in these fights, we often have the law on our side, and can argue that the agreements overbroad and unenforceable as written. If you would like to schedule a consultation to talk about restrictive covenants in employment, please feel free to contact me at firstname.lastname@example.org or (585) 512-3542. My employment practice includes the representation of businesses and individuals in matters involving restrictive covenants, non-compete agreements, discrimination and failure to pay wages in State and Federal Courts, and before administrative agencies, including the New York State Division of Human Rights and the United States Equal Employment Opportunity Commission.
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