Tag: Non-Compete Restrictions

Will 2 Years of Continued Employment Be Enough in Illinois to Enforce a Non-Compete?

The Answer: It’s Complicated.

In 2013, an Illinois Appellate Court in Fifield v. Premier Dealer Services, Inc., decided that absent additional consideration, continued employment for less than 2 years after the restrictive covenant was signed, would not be sufficient to enforce a restrictive covenant. The Fifield decision was unusual because courts often do not consider the adequacy of the consideration ̶ only that there was consideration to support a contract. Often, the promise of continued employment was acceptable. This decision sent shock waves throughout Illinois and required employers to reevaluate the value they were giving employees when entering into restrictive covenants.

Since that decision, Illinois state courts have routinely followed Fifield and applied its bright line test in cases where there is no additional consideration given to the employee except continued employment.

For example:

• October 31, 2017 – Employee signed a restrictive covenant after working for his employer for nearly 12 years and also served on the company’s board of directors. He announced his resignation and left 6 months later. He was finally removed from the Board a year after signing the restrictive covenant. Upon leaving he started a new business that directly competed with his employer. The Court found that the restrictive covenant was not enforceable because he did not work for at least two years after signing the restrictive covenant.
• June 25, 2015 – Employee worked for employer for more than three years and left. After working for the new employer for one day, the employee asked to come back. As a condition of his return, the employer requested he sign a restrictive covenant. The employee quit 18-months later. The Court held that because he did not work at least two years after executing the restrictive there was not sufficient consideration to support the restrictive covenants.

Complicating matters, however, Federal Courts in Illinois have consistently rejected Fifield’s bright line test and adhered to a more comprehensive fact specific analysis. The Federal Court’s decisions believe that the Illinois Supreme Court would not adopt Fifield’s rigid and bright line test and continue to a support a “totality of the circumstances” review. As a result, it has led to decisions that are at odds with the State courts:

For example:

• October 20, 2017 – Employees left after 13-months of employment, took confidential information, and started working for a competitor. Employees argued that Fifield governed and therefore the restrictive covenants were not enforceable. The Court disagreed and rejected Fifield’s bright line test.

• July 24, 2017 – Employee left after working for employer for nearly ten years. He signed a restrictive covenant 16 months prior to leaving. The Court rejected Fifield’s bright line rule. The Court noted that “[f]ive federal courts in the Northern District of Illinois and one federal court in the Central District of Illinois have predicted that the Illinois Supreme Court will reject the Illinois appellate court’s bright-line rule in favor of a more fact-specific approach.”

What does this mean for employers?

Because all Illinois employers should expect that they will have to enforce these agreements in a state court, the Fifield holding must continue to be respected. Employers should review their restrictive covenants to ensure the agreements are carefully drafted to improve enforceability.

Levin Ginsburg has been working with employers for approximately 40 years to help them protect their businesses. If you have any employment or other business related issues, please contact us at 312-368-0100 or email Walker Lawrence at wlawrence@lgattorneys.com

Illinois Freedom to Work Act Prohibiting Non-Compete Restrictions for “Low-Wage Employees” is Signed in to Law

On August 19, 2016, Illinois Governor Bruce Rauner signed into law the Illinois Freedom to Work Act. The new law, which is effective January 1, 2017, prohibits employers from entering into covenants not to compete with low-wage employees and provides that any agreement entered into in violation of the Act is illegal and void.

Under the Act, a “low-wage employee” is any employee who earns the greater of: (1) the hourly rate equal to the minimum wage required by the applicable Federal, State, or local minimum wage law; or (2) $13.00 per hour.

Covenants not to compete prohibited by the Act include agreements that restrict a low-wage employee from performing:

  1. work for another employer for a specified period of time;
  2. work in a specified geographical area; or
  3. work for another employer that is similar to such low-wage employee’s work for the employer with which the employee entered into the agreement.

The Act appears to apply only to covenants not to compete and does not expressly apply to non-solicitation agreements prohibiting low-wage employees from soliciting the employer’s customers or employees. The Act also does not prohibit non-disclosure or confidentiality agreements to protect an employer’s confidential information.

If you have any questions regarding the Illinois Freedom to Work Act or would like to discuss the preparation of employment agreements for your business, please contact:

Kristen E. O’Neill at:

koneill@lgattorneys.com or 312-368-0100.

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