We recently wrote that the Department of Justice’s and the Federal Trade Commission’s announcements condemning no-poaching agreements already have sparked civil class actions, including a putative class action against Jimmy John’s. Butler v. Jimmy John’s Franchise, LLP, No. 18-cv-0133, 2018 WL 3631577 (S.D. Ill. July 31, 2018). Since then, the district court denied a motion by Jimmy John’s to dismiss the plaintiff’s Section 1 claim.
According to the allegations, the plaintiff in Jimmy John’s, Sylas Butler, worked as a delivery driver and in-store employee for a Jimmy John’s franchise, but his supervisor cut his hours to approximately four hours per week. Butler wanted to transfer to a different Jimmy John’s franchise, but the Jimmy John’s franchise agreement prohibits any franchisee from soliciting or hiring any employee who has worked at another Jimmy John’s franchise within the previous 12 months. The franchise agreement imposes strict penalties for violating that clause, including termination of the franchise agreement. The franchise agreement also provides that all current and future franchisees are third-party beneficiaries of the agreement, meaning that other Jimmy John’s franchisees can enforce the no-hire provision. Finally, Jimmy John’s franchisees require their employees to sign a noncompete agreement, based on a form agreement provided by Jimmy John’s, that forbids their employees from working for any other area business that sells subs or sandwiches for two years after leaving the franchisee’s employment. Thus, the Jimmy John’s franchise agreement and the noncompete agreement allegedly precluded Butler from transferring to a different Jimmy John’s or a similar business.