Kevin Drum poses the titular question, noting that:
We all learned recently that sandwich shop Jimmy John's forces its workers to sign a noncompete agreement before they're hired. This has prompted a lengthy round of blogospheric mockery, and rightfully so. But here's the most interesting question about this whole affair: What's the point?
Laws vary from state to state, but generally speaking a noncompete agreement can't be required just for the hell of it. It has to protect trade secrets or critical business interests. The former makes them common in the software business, and the latter makes them common in businesses where clients become attached to specific employees (doctors, lawyers, agents) who are likely to take them with them if they move to a new practice. But none of this seems to apply to a sandwich shop.
Indeed. There is general agreement that "when you seek to enforce [a] boilerplate noncompete, will a Virginia court uphold the agreement? Probably not." Hillary J. Collyer, FAIRFAX COURT ISSUES SPLIT DECISION ON EMPLOYMENT CONTRACT, 22 No. 10 Va. Emp. L. Letter 2 (2010). Indeed, that can be true even in industries like IT where noncompetes can make sense.
As a result, the usual advice is that one "should not use the same 'boilerplate' noncompete agreement for everyone. For example, with respect to key employees, the agreement should be drafted to reflect that employee's individual job duties and circumstances." William G. Porter II & Michael C. Griffaton, Using Noncompete Agreements to Protect Legitimate Business Interests, 69 Def. Couns. J. 194, 199 (2002).
So why bother? Cynthia Estlund explains that:
Even a manifestly invalid non-compete may have in terrorem value against an employee without counsel. Some employers insert non-compete covenants as near-boilerplate in employment agreements for a wide variety of positions, with little regard to the particulars of the position or to whether employees are privy to protectible information. As far as the law is concerned, employers risk nothing with that sort of overreaching (though the market might sometimes exact a price), and they might succeed in keeping employees from leaving and moving to competitors when they are entitled to do so.
Cynthia L. Estlund, Between Rights and Contract: Arbitration Agreements and Non-Compete Covenants As A Hybrid Form of Employment Law, 155 U. Pa. L. Rev. 379, 423 (2006). She also notes (fn. 32) that "I recently heard of two law students who were required to sign non-compete agreements in pre-law-school jobs (not as high-level executives!). They did so either reluctantly or with little thought because they wanted the jobs, and then later felt compelled to reject attractive job opportunities that they feared might violate the terms of the non-compete agreement."
In sum, my guess is that somebody at Jimmy Johns figured "it can't hurt, it won't cost anything, and there might be some cases where it'll deter employees for leaving for a better paying job." Whether that is desirable and/or sensible is a question I'll leave for the reader.
