When Can Employees Sue an Employer to Rule a Non-Compete Unforceable

A recent decision by the Federal Court in Chicago suggests that a former employee cannot sue his former employer to challenge the validity of a non-compete agreement if there is no threat that the former employer will seek to enforce it.  But as discussed herein, there may be other ways to challenge it.

First some background. While non-compete agreements are rarely enforced and they can still interfere with the former employee’s job search (this was explained in detail here). Each party is balancing its interests, and the employee usually has two options: (1) negotiate with the former employer to modify the non-compete agreement; or (2) file a lawsuit to declare the agreement invalid. This recent decision in Brunner v. Jimmy Johns, provides some guidance on option 2.

In Brunner v. Jimmy Johns, the plaintiffs sought to declare the “legal interests,” “validity,” and “enforceability” of the non-compete agreements signed by all Jimmy John’s employees (the same agreements that garnered national attention). The Court considered the question of whether there was a real controversy, which is a requirement for a lawsuit.

The Court identified two tests that must be met before an employee can sue an employer to challenge a non-compete agreement:

  1. The employee must have a “reasonable apprehension” that the employer is going to file a lawsuit against the employee for violating the non-compete agreement.
  2. The employee must either be prepared to or in-fact engage in conduct that would violate the non-compete agreement.

The court found that the employees in the Jimmy Johns case failed both tests. The complaint in that case offered the following allegations:

  • The employee does not understand the scope of the agreement
  • The employee is concerned that ongoing disclosures could constitute a breach
  • The employee expected the agreement to be enforced because the CEO had previously filed a lawsuit to enforce the agreement (against his cousin no-less)
  • The employee overheard a conversation by management in which an employee was terminated for working at a different store after signing the agreement
  • The employee believed he was violating the agreement (but lacked personal knowledge on key information)

The Court concluded that these allegations amounted to mere speculation and that there was no controversy because there was no argument that the agreement was going to be enforced.  Instead,  the employees offered a number of vague allegations of apprehension of a problem.

Finally, even if the employee met this standard, Jimmy Johns provided evidence that it had no intention of enforcing the non-compete agreement against these employees in the future. As a result, there was no need to enter a declaratory judgment.

What are the key takeaways that an employee should consider when it wants to file a lawsuit challenging the enforceability of a non-compete agreement?

  • An employee must have ample evidence to show that it fears a lawsuit from an employer
  • An employee may not be able to file a lawsuit as a peremptory challenge to the agreement without first engaging in conduct that either contemplates violating or violates the non-compete agreement.

This decision provides some specific guidance on what an employee must do first before filing a lawsuit against an employer. It is important to work with a Non-Compete Attorney to ensure that these minimum requirements are met and to discuss your best options going forward.

If you are facing a non-compete agreement and would like legal advice, be sure to contact an employment attorney immediately.

The employment attorneys at Maduff & Maduff have been specializing in non-compete agreements, discrimination, sexual harassment, and wage and overtime theft for more than 20 years. Contact us with your employment law needs today.