How Long is Long Enough: Substantial Employment Standard
for Non-Compete Agreements
Non-Compete covenants are among the strongest ways to protect against an employee potentially walking away with vital and, even more importantly, confidential information of the employer. Though it has long been established that timing plays a large role in whether or not an employment agreement is enforceable, a new holding has established that timing may not be everything when it comes to a post employment non-compete agreement.
A two-year time frame was considered to be the main threshold to satisfy “substantial” employment, however, the ruling in Montel Aetnastak, Inv.v. Miessen, 998 F. Supp. 2d 694 (N.D. Ill. 2014), demonstrates that because of inconsistencies between both lower Illinois courts and the Illinois Supreme Court, the implementation of a bright-line rule is not the determining factor when it come making a decision whether employment was “substantial”. Also, the Court determines that over broad post-employment non-compete covenant is not for the Court to narrow under the facts in that case.
In Montel Aetnastak, Inc. v. Miessen, the Court takes time to examine the alleged breach of a non-compete provision by a former employee from a shelving system manufacturer. In 2010, Miessen signed a contract with Montel Aetnakstak, Inc. (“MAI”), which included a non-compete clause that in turn prohibited her from “engaging in any business substantially related to the business of MAI for two years after the termination of the agreement.” In February of 2012 Miessen resigned from her job at MAI and take up employment at one of its competitors to work on projects in competition with MAI. An action was brought against Miessen for, among others, breach of the non-compete provision contained within her employment agreement.
One of the first issues discussed by the court is whether or not Miessen was employed for a “substantial period”. The court discusses that there has been deviation from the traditional rule that when examining post-employment covenants not to compete, the court must look at whether there is adequate consideration to support the covenant. If the employment did not fall within the time frame to be considered “substantial employment”, a covenant not to compete post-employment may fail.
When Court looks to precedent within Illinois, controversy sets in. As pointed out by the Court, some Illinois case law has settled on a time frame of at least two years of continued employment to satisfy a “substantial period”. However, the Court also recognizes that other Illinois courts have distinguished the two year rule by also looking at factors such as salary raises and bonuses as well as voluntary resignations by the employee.
After the Court highlights the competing holdings of lower Illinois courts and the “lack of clear guidance” given by the Illinois Supreme Court on the issue, t the Court decides that it cannot apply the bright-line test. It is settled that the Court will look at both the length of time Miessen was employed with MAI and also take into consideration the fact that she voluntarily resigned. The Court holds that based on these factors, along with her 15-month employment, Miessen was employed for a substantial period and was provided “adequate consideration to support the enforceability of the employment agreement.” Id. at 715.The business litigation attorneys at Lubin Austermuehle near Chicago and Oak Brook represent business owners and professionals regarding non-competition agreements, covenants not to compete, restrictive covenants and other claims throughout the Chicagoland area, including Cook, DuPage, Lake, Kane, McHenry and Will Counties; and in the Mid-West region, including Indiana, Wisconsin and Iowa. You can contact us by calling our toll free number 630-333-0333 for a consultation or contact us online by filling out the form at the side of this blog.