Impact | Business Risk Management Blog

Think twice before requiring at-will, low-wage workers to sign noncompetes

On June 8, the Illinois attorney general filed a lawsuit in Cook County (Illinois) Circuit Court against two Jimmy John’s entities: franchisor Jimmy John’s Franchise LLC and an LLC owning eight Jimmy John’s sandwich shops, Jimmy John’s Enterprises LLC. The lawsuit alleges the sandwich chain engaged in unfair and deceptive acts or practices unlawful under the Consumer Fraud and Deceptive Practices Act. The lawsuit seeks to stop the allegedly unlawful use of noncompetition agreements on at-will, low-wage employees and to ensure that current and former employees are informed that the noncompetition agreements they signed are unenforceable. 

The new year is upon us, and franchisors across the U.S. are focusing on updating their franchise disclosure documents and renewing their franchise registrations. In this busy time, it is easy to overlook other filing requirements for franchisors.

Since 2009, franchisors that have at least one franchisee that does business in New York state and is required to be registered as a sales tax vendor are required to file information returns with the New York State Department of Taxation and Finance. The reporting period is from March 1 to February 28 (or 29) of the subsequent year. The return is due on March 20.

Today the Office of the General Counsel of the National Labor Relations Board (“NLRB”) took its next step in the investigation of labor practices within the McDonald’s franchise system and issued consolidated complaints against McDonald’s franchisees and the franchisor – McDonald’s USA, LLC on the theory that the franchisor is a joint employer with its franchisees. Consistent with General Counsel’s amicus brief in the Browning-Ferris matter that was filed this summer, the focus of the complaints appear to be on the use of technology and tools that allows franchisors insight and potential control over franchisee operations.