Chicago Business Litigation Lawyer Blog
This Article gives an excellent over view of non-compete agreement law in various states. It summarizes the law for these agreements in the following states: Arizona, Colorado, Georgia, Illinois, Missouri and New York. It provides a number of insightful tips on how courts are likely to view non-compete agreements depending on the facts of the case. For instance, it concludes, in our opinion accurately, that Illinois courts will likely be more likely to enforce non-compete agreements if the employee has engaged in some sort of wrongful behavior such as misappropriating confidential information or starting the competing business using the employer’s computers and other resources.
With regard the to Illinois the article states:
Illinois courts generally disfavor employer-employee restrictive covenants. Consequently, courts look for reasons not to enforce restrictive covenants and the fact that an employee is “low level” often creates an equitable reason for the court to refuse to enforce restrictive covenants. However, bad conduct by a former employee, whether by taking confidential information or poaching former customers of the former employer, often will overcome a court’s reluctance to enforce a restrictive covenant against a low-level employee.
Historically, Illinois courts only enforced such restrictive covenants if the employer could demonstrate it had a legitimate protectable interest. Courts defined legitimate protectable interest to include “near permanent customer relationships” or confidential information. In 2011, the Illinois Supreme Court revisited this issue in Reliable Fire Equipment v. Arredondo, holding that an employer must demonstrate both a legitimate protectable interest and the reasonableness of the scope (activity, time and geographic). However, the Reliable Fire court also held that an employer could establish a legitimate protectable interest in ways other than confidential information or long-standing customer relationships, creating further confusion in the Illinois legal landscape. This ruling required trial courts faced with a motion for temporary restraining order seeking to restrain a former employee from competing to focus on what interest an employer is seeking to protect and whether that interest is sufficiently clear at a preliminary stage such that a TRO is justified. Generally, Illinois courts have looked to two key issues in recent years—has the former employee “taken” confidential information and is the former employee using such confidential information to pursue his former employer’s clients. If the answer to either of these questions is yes, Illinois courts are likely to enforce a restrictive covenant.
An interesting dilemma has arisen in the last four years since the Illinois Appellate Court decided Fifield v. Premier Dealers Services. The Fifield court held that at-will employment is inadequate consideration to support restrictive covenants until at least two years of at-will employment have passed since the agreement was put in effect. This creates another hurdle for enforcing restrictive covenants against lower-level employees. Most low-level employees are employees at will. Consequently, for an employer to be confident that its restrictive covenants will not fail for lack of consideration, some unrestricted consideration (e.g., a signing bonus) must be provided at the outset of the employment relationship.