Articles Posted in Non-Compete Agreement / Covenant Not to Compete

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When a company sues a former employee for breaching confidentiality and solicitation agreements, it needs more than generalized accusations in order to hold up in court. Bridgeview Bank Group employed Thomas M. as a senior vice president and SBA loan officer from 2013 to 2015. Thomas originally signed a noncompete agreement that prohibited him from engaging in SBA lending for six months after termination, but after he was dismissed by the company, the contract was modified as part of a severance agreement. He was allowed to compete with Bridgeview but had to refrain from soliciting Bridgeview clients or employees for one year, and from making “disparaging” comments against the company. He was also required to maintain the confidentiality of Bridgeview’s information.

More than four months after Thomas’s termination, Bridgeview brought claims against him for breach of contract and fiduciary duty, and tortious interference with business relationships. The company claimed that Thomas had contacted its customers, divulged confidential information, and made disparaging remarks about Bridgeview, alleging that he had interfered with “one or more contractual or prospective contractual relationships.” However, as noted by the First District Appellate Court on appeal, Bridgeview identified no specific customer, confidential piece of information, or disparaging comment in its complaint. Bridgeview also sought a temporary restraining order against Thomas, but provided no more in the way of documentation than e-mail messages Thomas supposedly sent to himself on his last day of work, containing an income statement, various internal passwords, and a list of about 3,000 contacts which reportedly included Bridgeview staff and prospective customers. Continue reading ›

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If an Illinois employer drafts a post-employment restrictive covenant that is impermissibly overbroad, it cannot expect a court to modify it and enforce it, as a recent Third District appellate case illustrated.

Brian S. joined Deere Employees Credit Union (DECU) in 2009 as an investment advisor at its main branch in Moline, Illinois. His employment contract prohibited him from soliciting DECU’s clients or members for a two-year period following his termination. Brian resigned from DECU in 2015 and began working for a different financial services provider. He sent letters to up to 250 of his former DECU clients notifying them of his new situation.

DECU sued Brian for breach of the nonsolicitation covenants, seeking a preliminary injunction barring him from further contact with its members. Brian acknowledged his current clients included up to 17 DECU members, but argued the contract was unnecessarily broad, unenforceable as a matter of law, and could not be used to grant injunctive relief. The trial court found the covenants overly broad and unenforceable as written, but partly granted DECU’s request for injunctive relief by modifying the contract language and enjoining Smith’s contact with only those members he served while employed at DECU. Continue reading ›

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If you need to ask whether or not you can do a certain thing, the answer is probably no. When Thomas Dotoli and his wife drafted a contract to sell their companies to their daughter-in-law, Cheryl, they included a clause that allowed a court to modify the non-compete agreement if the court deemed it to be too broad. But not all courts have the authority to rewrite contracts.

Non-compete agreements are pretty standard in most business contracts. They’re designed to protect the business interests of both parties, ideally without infringing too much on the other party’s legitimate business interests.

In the contract in question, Cheryl, as the owner and operator of Associated Beverage Systems of the Carolinas, was prevented from doing business in either North Carolina or South Carolina for a period of five years after purchasing the companies from the Dotolis for $10,000. The contract provided that a court could revise the terms of the agreement if it found them to be unreasonable.

When Associated Beverage began conducting business in both North and South Carolina, the Dotolis sued Cheryl, her company, and Loudine, their son and Cheryl’s husband, for tortious interference as well as deceptive and unfair practices. Loudine was charged with breach of contract. Continue reading ›

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Almost everyone who has signed an employment agreement in the United States has most likely signed a noncompete agreement. They are agreements included in the contract that state that the employee will not work for a competitor of the employer in the event their employment is terminated for any reason. They usually include a geographical and a time requirement. For example, most such agreements restrict the employee from working for a competitor within five or ten miles of the employer for six months or a year after termination of employment.

Each state has their own laws governing employment contracts and noncompete agreements. California is the strictest and won’t uphold any noncompete agreements at all. Most courts will enforce noncompete agreements, as long as they protect only the employer’s “reasonable” business interests.

Courts recognize that employers have a legitimate business interest in their employees. They devote significant time and resources to training those employees, not to mention the trade secrets and clients those employees have access to. Noncompete agreements are a way for businesses to protect themselves from competitors who might try to poach employees, but courts will often refuse to enforce a noncompete agreement if the judge thinks it’s too restrictive. Continue reading ›

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Federal courts applying Illinois law continue to side with employers in maintaining that former employees should not avoid liability for breaching employment agreements based on duration of employment.

In Traffic Tech, Inc. v. Kreiter (2015 WL 9259544), the plaintiff, a Canadian-based transportation management company, hired defendant Jared K. as vice president of business development. The company paid him a $250,000 signing bonus and the equivalent in annual salary, plus commissions. Jared K. signed an employment agreement promising not to disclose or use the company’s confidential information or to solicit its clients or employees for 18 months after termination of employment. He also agreed not to engage in an “outside job” that would be in direct conflict with Traffic Tech’s business. Continue reading ›

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When a former employee of a company is accused of soliciting his ex-coworkers to defect to a competitor, can he challenge enforcement of a nonsolicitation agreement on the sole ground that he did not work for the company long enough? One more Illinois federal court has answered that question in the negative.

In an opinion released March 10, 2016 in R.J. O’Brien & Associates LLC v. Robert Williamson, 2016 WL 930628, U.S. District Court Judge Robert W. Gettleman denied summary judgment to a defendant employee who argued that two years’ employment is required as consideration for restrictive employment covenants. The defendant, a former trader for the Chicago-based futures brokerage R.J. O’Brien & Associates, signed confidentiality and nonsolicitation agreements upon accepting employment at the firm in 2012. He also signed an “associated persons” agreement. The agreements stipulated, among other things, that defendant could not solicit O’Brien employees or customers for one year after leaving the company. According to the facts presented in Judge Gettleman’s opinion, defendant left the firm after one year in April 2013 and took a position at Wells Fargo Securities. Thereafter, he remained in contact with several O’Brien traders whom he attempted to convince to leave the firm to join Wells Fargo, successfully recruiting at least one. O’Brien brought a two-count complaint against him alleging breach of the agreements.

Noncompete agreements and other restrictive covenants are usually signed by an employee upon accepting employment, and are often intended to prevent pilfering of clients or trade secrets by those employees when they separate from the company. In some cases, such as the one at hand, businesses also seek to prevent a former employee from siphoning their human talent. Illinois, like most states, enforces restrictive employment covenants as long as they meet certain requirements. First, there must be some consideration, or promise, offered by the employer in return for the employee’s agreeing to refrain from taking certain actions upon termination of employment. Continue reading ›

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Anytime someone works closely with a particular business, whether as an employee, franchisee, or even outside counsel, they are usually granted access to sensitive information regarding how the business is run. In order to keep their trade secrets safe and protect their business interests, companies frequently require certain people to sign a non-compete agreement. This type of agreement is usually included in an employment contract or, in some cases, a franchise contract. It places restrictions on when and where the person can do business, and sometimes even who the person can do business with. For example, stealing employees and/or customers from a business is generally considered to be sabotage and most non-compete agreements prohibit such practices.

Having a party sign a non-compete agreement and getting a court to uphold the agreement are two different things. Most courts recognize the need of businesses to protect their own interests and that one of the ways they do so is through non-compete agreements. But many courts consider whether the agreement protects only the company’s legitimate business interests. If the court deems the agreement to be overly broad, it could rule that the agreement created too heavy a burden on the individual, and so is not enforceable. Continue reading ›

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Covenants not to compete, also known as non-compete agreements, are often used by businesses to prevent their employees from leaving the company and then using the knowledge they gained to compete with the employer within the same geographic territory. Such agreements are usually signed by an employee upon accepting employment, and are often intended to protect trade secrets or prevent pilfering of a business’s clients by former employees. They usually restrict a former employee from operating the same type of business or working within the same industry, within a defined territory, for a finite amount of time, which can be anywhere from one to three years.

Illinois, like most states, enforces covenants not to compete in employment agreements as long as they meet certain requirements. First, there must be some consideration, or promise, offered by the employer to the employee in return for agreeing to refrain from competing upon termination of employment. Typically, the employment itself is considered adequate consideration but only after the employee works for the employer for two years after signing the agreement.  The employer can also pay reasonable compensation such a bonus when the employee signs the agreement. The agreement also must be reasonable in scope. The Illinois Supreme Court has established a rule that attempts to balance the interests and rights of the employer with those of the former employee while also considering the impact on the public. Continue reading ›

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Your employer may demand that its new new employees sign a non-compete agreement before you start the job or if it is implementing a new program requiring such agreements. Such agreements usually go into effect when you leave that company. Employers ask you to sign non-competition agreements for a variety of different concerns.  These concerns are protection of trade secrets, customer relationships and business goodwill.  Courts generally disapprove of non-competition agreements if they simply are designed to limit and restrict a former employee’s right to earn a living. Non-competition agreements are therefore closely scrutinized by the courts for reasonableness and to make sure that they are not overly restrictive.

The Law’s Criteria for Non-Compete Agreements

In order to be considered legal, a non-compete agreements must:

  • Be supported by consideration (provision of some benefit to the worker) at the time signed;
  • Protect a legitimate business interests of the employer; and
  • Be reasonable (as opposed to overly and unnecessarily broad) in scope, geography, and time.

Non-compete agreements must generally be supported by legally valid and legitimate consideration — the employee must receive something of value in exchange for the promise to refrain from competition.  In Illinois this can be a payment of money or two years of employment following signing the non-compete or other benefits. If an employee signs a non-competition agreement prior to beginning employment, the employment itself will be sufficient consideration for the promise not to compete if such employment continues for two years. Continue reading ›

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Our Chicago non-compete agreement attorneys have defended high level executives in covenant not to compete and trade secret lawsuits. A case in which our firm defended a former Motorola executive was covered in Crain’s Chicago business. You can view that article by clicking here.

Lubin Austermuehle a firm of Chicago business dispute lawyers handles litigation over non-compete clauses for individuals and businesses of all sizes, including small or closely held businesses for whom competition from an ex-employee can be a serious threat. Our Chicago business lawyers with offices near Naperville, Oak Brook and Chicago have substantial experience in restrictive covenant and breach of contract cases, and we are proud of our record of strong results.

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