It was once the case that only high level employees subject to top-secret information were forced to sign non-compete agreements in order to prevent them from jumping ship to a competitor company. That is no longer the case, and has not been for some time, as the non-compete has been used increasingly liberally by companies, including Nordstrom according to a new lawsuit.
Nordstrom's Trunk Club has been slapped with a lawsuit by a former employee who claims that its online personal styling service requires even entry-level employees to sign highly restrictive non-compete agreements, making it difficult for them to take jobs with "nearly any other retail, clothing or fashion business” after they have left Trunk Club.
For the uninitiated, non-compete agreements are restrictive covenants, which commonly come in the form of clauses in employment agreements or contracts, and which place terms on the employee once he or she has left the company with which he has entered into the agreement.
A non-compete places limits on the type of work an employee may accept upon departing from a company in order to prevent the transmission of valuable trade secret information. Because such agreements tend to place significant limitations on a former employee's ability to earn a living, by legally preventing him from accepting employment with a competing company, courts tend to disfavor them and deem them unenforceable unless they are carefully tailored.
In her lawsuit, which was filed last month in an Illinois state court, Chicago-based Molly Dowell, who began working as a personal stylist at Trunk Club in June 2016, alleges that she decided to leave the company in January fearing that in light of repeated declines in revenue, she might be out of a job in the near future. Thereafter, she sought to join Mac & Mia, believing that the online personal styling-based children’s brand was not a direct competitor of Trunk Club, and therefore, not a violation of her non-compete with Trunk Club.
The non-compete agreement that Dowell signed with Trunk Club prevented her from taking a job with "any company that competes, in any way, with Trunk Club or its parent company Nordstrom” for one year and without geographic limitation, meaning that the clause applies across the U.S., at least in theory.
Dowell alleges that when she inquired with Trunk Club’s human resources about Mac & Mia to make sure it was not, in fact, a competition company, she was told it is and that Trunk Club would not grant an exception to the non-compete restrictions. As a result, Dowell claims that Trunk Club’s non-compete agreements are in violation of the Illinois Antitrust Act and an unlawful interference with her prospective economic advantage, a tort claim under Illinois law.
“Trunk Club’s only motivation for requiring and enforcing its broad and unreasonable covenant not to compete,” Dowell asserts, “is to suppress wages, prevent employees from leaving and restrain competition in the retail labor market.”
In addition to monetary damages, and injunctive and declaratory relief (thereby freeing her from the non-compete agreement), Dowell is seeking certification of her class action lawsuit in order to enable hundreds of other Trunk Club and Nordstrom employees subject to onerous non-compete agreements to join in her lawsuit.
A spokesman for Trunk Club said the company is "aware of the lawsuit and plans to vigorously defend this matter."
UPDATED (8/7/2017): Judge Michael T. Mullen of the Circuit Court today granted Plaintiff Molly Dowell’s Emergency Motion for Temporary Restraining Order and Preliminary Injunction, issuing an order that prevents Trunk Club, Inc. from enforcing a covenant not compete against their former employee.
Upon receiving the Motion, Trunk Club immediately released Dowell from her covenant not to compete, committed that it would not enforce Molly’s covenant not to compete and agreed to the granting of the Motion. The case will continue, as Dowell seeks class certification for all Trunk Club at-will employees, damages and attorney fees.
“Trunk Club basically admitted that their covenant not to compete was invalid,” Tony Dowell, Molly’s attorney and father said. “Companies know these covenants are invalid, but they continue to impose them on low level employees to suppress wages and limit employee mobility and advancement. So while CEO and executive salaries skyrocket, regular employee’s wages remain stagnant.”