Covenant Not To Compete Enforceable or Not — Factors to Consider?: Reliable Fire Equip. Co. v. Arredondo (2011 IL 111871).
“Non-Compete Agreements: Are they Iron Clad?”
In Illinois, the standard for enforcing non-compete agreements has changed in recent years. Prior to a landmark decision in 2011, Illinois courts generally enforced non-competes that were sufficiently limited in scope, duration and geography, as long as the employer seeking to enforce the agreement could show that enforcement was necessary to protect a legitimate business interest. Courts generally found that there were only two legitimate business interests in need of protection: confidential information, and near-permanent customer relationships.
However, in Reliable Fire Equip. Co. v. Arredondo (2011 IL 111871), an Illinois employment lawsuit, the Court took a stark turn from its historical treatment of non-competes when it modified the legitimate business interest test.
In Reliable, Arnold Arredondo and Rene Garcia worked as sales employees for Reliable Fire Equipment Company. They had signed non-compete agreements that prohibited them from competing with Reliable in Illinois, Indiana and Wisconsin for one year after termination. After their termination, Arredondo and Garcia eventually began working for a competitor, and Reliable sued to enforce the non-compete agreements Garcia and Arredondo had signed.
The trial court ruled that the covenants not to compete were unenforceable. The case eventually went up to the Illinois Supreme Court, which reversed and remanded the case for additional proceedings, and stated as follows:
“Whether a legitimate business interest exists is based on the totality of the circumstances of the individual case. Factors to be considered in this analysis include, but are not limited to, the near-permanence of customer relationships, the employee’s acquisition of confidential information through his employment, and time and place restrictions. No factor carries any more weight than any other, but rather its importance will depend on the specific facts and circumstances of the individual case.” Reliable Fire, 2011 IL 111871, Slip. Op. at 12.
In the aftermath of Reliable, enforceability of a covenant not to compete in Illinois now depends on each of the facts and circumstances specific to each case, and a covenant not to compete will be enforced only if it passes “reasonableness” muster within this framework. Additionally, a covenant not to compete will only be enforceable if it is no greater than necessary to protect the employer’s legitimate business interest, and does not impose an undue hardship on the employee or injure the public.
Super Lawyers named Chicago and Oak Brook business trial attorneys Peter Lubin and Vincent DiTommaso Super Lawyers in the Categories of Class Action, Business Litigation and Consumer Rights Litigation. DiTommaso-Lubin’s Oak Brook and Chicago business trial lawyers have over a quarter of century of experience in litigating complex business and commercial litigation disputes. We handle emergency business law suits involving injunctions, and TROS, defamation, libel and covenant not to compete, franchise, distributor and dealer wrongful termination and trade secret lawsuits and many different kinds of business disputes involving shareholders, partnerships, closely held businesses and employee and partner breaches of fiduciary duty. We also assist businesses and business owners who are victims of fraud or defamatory attacks on their business and reputations.
DiTommaso-Lubin’s Naperville and Wheaton covenant not to compete agreement lawyers have more than two and half decades of experience helping business clients unravel the complexities of Illinois and out-of-state business laws. Our Chicago non-compete agreement and covenant not to compete attorneys represent individuals, family businesses and enterprises of all sizes in a variety of legal disputes, including disputes among partners and shareholders as well as lawsuits between businesses and and consumer rights, auto fraud, and wage claim individual and class action cases. In every case, our goal is to resolve disputes as quickly and successfully as possible, helping business clients protect their investments and get back to business as usual. From offices in Oak Brook and Chicago, near Evanston and Genview, we serve clients throughout Illinois and the Midwest.
If you need assistance relating to a non-compete agreement or covenant not to compete, contact one of our Oak Brook and Chicago non-compete agreement lawyers for a free consultation at (877) 990-4990 or by filling out our contact us form at the side of this blog.