Trade Secrets & Employee Mobility

Last week, the New York State Senate advanced two bills seeking to ban both “no-poach” clauses in franchise agreements and “no-rehire” clauses, which are commonly used in settlement agreements.

The first of these bills, known as the End Employer Collusion Act (Bill S562), prohibits no-poach agreements between franchisors and franchisees.  Such agreements restrict franchisees from soliciting or hiring current or former employees of the franchisor or other franchisees.  The End Employer Collusion Act would also provide a private right of action for any person denied ...

States across the country have been using enforcement actions, legislation, and interpretive guidance to limit employers’ ability to enforce restrictive covenants against low wage workers. The recent decision in Butler v. Jimmy John’s Franchise, LLC et. al., 18-cv-0133 (S.D. Ill. 2018) suggests this trend may extend to federal antitrust law.

The Butler case relates to the legality of certain restrictive covenants in Jimmy John’s franchise agreements.[1] The Complaint alleges that Jimmy John’s required franchisees to agree not to hire any job applicants who worked ...