Illinois sues payday lender over low-wage workers forced to sign noncompete agreements
The Illinois attorney general’s office is suing Check Into Cash, a national chain of payday lending stores, for allegedly forcing low-wage employees to sign noncompete agreements in violation of state law.
The lawsuit, filed Wednesday in Cook County Circuit Court, said Check Into Cash effectively prevents employees from getting another job in Illinois as anything from a bank teller to a retail cashier for one year after leaving.
“Check Into Cash inappropriately tries to retain low-income workers by requiring them to sign unfair noncompete agreements that attempt to prevent workers from getting better jobs elsewhere,” Illinois Attorney General Lisa Madigan said in a news release. “We should be encouraging, not stopping, people to get better, higher-paying jobs.”
One of the largest payday lenders in the nation, Cleveland, Tenn.-based Check Into Cash has more than 1,000 stores in 28 states, including 33 in Illinois.
Check Into Cash has used its current noncompete agreement since 2014, according to the lawsuit, requiring everyone from customer service representatives to store managers to sign. That includes employees who make less than $13 per hour.
The state alleges the agreement violates the Illinois Freedom to Work Act, which went into effect Jan. 1 and prohibits the use of noncompete agreements for employees whose earnings do not exceed the greater of minimum wage or $13 per hour. The minimum wage in Illinois is $8.25 per hour, although it’s higher in Chicago and Cook County.
W. Allan Jones, founder and owner of Check Into Cash, did not respond Thursday to a request for comment.
Job applicants at Check Into Cash are informed that refusal to sign a noncompete agreement “will be grounds to rescind any employment offer made,” the lawsuit says. That requirement applies to workers in every position, including customer service representatives whose responsibilities range from answering telephones and balancing the cash drawer to making collection calls, the suit alleges.
Check Into Cash prefers but does not require customer service representatives graduate from high school and they must sign the noncompete agreement on their first day of work, or shortly thereafter, according to the lawsuit.
A Treasury Department report issued last year found that nearly 30 million Americans are covered by noncompete agreements. While some of the contracts may serve an important purpose, such as protecting trade secrets, others are overly restrictive and lack transparency, the study found.
In December, about a month before the new law took effect, the state settled a similar lawsuit with Illinois-based fast food purveyor Jimmy Johns, which had required all employees — including sandwich-makers and delivery drivers — to sign a two-year noncompete agreement. The settlement required Jimmy Johns to rescind its agreements and pay $100,000 to the attorney general’s office “to raise public awareness” regarding the legal standards for noncompete agreements.
Jimmy John’s has said it stopped using the agreements before the attorney general's office brought action against the company.
The lawsuit against Check Into Cash, which alleges the company has violated the state’s consumer fraud act, is seeking to preclude it from using noncompete agreements in Illinois and void its existing agreements. The suit also seeks a $50,000 penalty per violation for acts deemed unlawful with the intent to defraud.