Chicago Business Litigation Lawyer Blog

It is well settled that “Illinois courts abhor restraints on trade” and therefore “postemployment restrictive covenants are carefully scrutinized . . . because they operate as partial restrictions on trade.” McInnis v. OAG Motorcycle Ventures, Inc., 2015 IL App (1st) 142644 at ¶26; see also Medix Staffing Sols., Inc. v. Dumrauf, 17 C 6648, 2018 WL 1859039, at *2 (N.D. Ill. Apr. 17, 2018) (granting motion to dismiss and noting that “[u]nder Illinois law, covenants not to compete are disfavored and held to a high standard”); Grand Vehicle Works Holdings Corp. v. Frey, 03 C 7948, 2005 WL 1139312, at *6 (N.D. Ill. May 11, 2005) (“Illinois courts disfavor and closely scrutinize restrictive covenants because they are repugnant to the public policy encouraging an open and competitive marketplace”); Cambridge Eng’g., Inc. v. Mercury Partners 90 BI, Inc., 378 Ill.App.3d 437, 447 (1^st Dist 2007) (refusing to enforce restrictive covenant).

For a restrictive covenant to be enforceable, the terms must be “reasonable and necessary to protect a legitimate business interest of the employer.”  Medix Staffing Sols., Inc. 2018 WL 1859039, at *2. Thus, a restrictive covenant is reasonable only if it: “(1) is no greater than is required for the protection of a legitimate business interest of the employer-promisee; (2) does not impose undue hardship on the employee-promisor, and (3) is not injurious to the public.” Reliable Fire Equip. Co. v. Arredondo, 2011 IL 111871, ¶ 17. “The employer seeking to enforce a restrictive covenant bears the burden of demonstrating that the full extent of the restraint is necessary for protecting its interests.” Cambridge Eng’g., Inc., 378 Ill.App.3d at 447. The employer must also establish a protectable interest in its customers by showing for example that it has near-permanent relationships with certain customers based upon the employer’s relationship with the customers. Giffney Perret, Inc, 2009 WL 792484, at *11. Here, the non-solicitation agreement fails to meet that standard and ITsavvy will not be able to meet its steep burden of proof.

A restrictive covenant that precludes an employee from solicting or selling to any of his former employer’s customers anywhere, with no geographic scope and no limitation based upon whether the customer did business with an employee or was a long-term customer of the employee before he or she began working for the employer is generally unenforceable in Illinois, unless the employee had contact with and/or worked with all or nearly all the employer’s customers.

An employer cannot demonstrate any valid basis for preventing an employee from soliciting customers with whom he or she never worked.  See AssuredPartners, Inc. v. Schmitt, 2015 IL App (1st) 141863, ¶ 42 (non-solicitation provision invalid where it went beyond protecting those customer relationships that employee developed while working for an employer); Cambridge Eng’g., Inc., 378 Ill.App.3d at 455 (same); Lawrence & Allen v. Cambridge Human Resources Group, 292 Ill.App.3d 131, 138 (2d Dist. 1997) (“[c]ourts are hesitant to enforce prohibitions against employees servicing not only customers with whom they had direct contact, but also customers they never solicited or had contact with while employed by plaintiff”); Trailer Leasing Co. v. Associates Commercial Corp., 96 C 2305, 1996 WL 392135, at *3 (N.D. Ill. July 10, 1996)) (holding customer non-solicitation provision unenforceable where it includes customers with whom employee had no contact). Continue reading ›