Your employer may demand that its new new employees sign a non-compete agreement before you start the job or if it is implementing a new program requiring such agreements. Such agreements usually go into effect when you leave that company. Employers ask you to sign non-competition agreements for a variety of different concerns. These concerns are protection of trade secrets, customer relationships and business goodwill. Courts generally disapprove of non-competition agreements if they simply are designed to limit and restrict a former employee’s right to earn a living. Non-competition agreements are therefore closely scrutinized by the courts for reasonableness and to make sure that they are not overly restrictive.
The Law’s Criteria for Non-Compete Agreements
In order to be considered legal, a non-compete agreements must:
- Be supported by consideration (provision of some benefit to the worker) at the time signed;
- Protect a legitimate business interests of the employer; and
- Be reasonable (as opposed to overly and unnecessarily broad) in scope, geography, and time.
Non-compete agreements must generally be supported by legally valid and legitimate consideration — the employee must receive something of value in exchange for the promise to refrain from competition. In Illinois this can be a payment of money or two years of employment following signing the non-compete or other benefits. If an employee signs a non-competition agreement prior to beginning employment, the employment itself will be sufficient consideration for the promise not to compete if such employment continues for two years.
Designed to Protect Legitimate Business Interests
An employer’s goodwill with customers is a business asset, thus an employer can use a non-competition agreement to block a former employee from using that goodwill and competing with the employer. So too, a company or employer can use a non-compete agreements to shield its confidential information from theft by a former employee. In order for such information to be entitled to protection, the employer must take reasonable measures to keep the information secret and confidential and show that the information gives it an advantage in the competitive marketplace.
Reasonableness in Scope in the Key to Making the Agreement Enforeable
In making the decision whether or not to enforce a non-compete agreement, courts will engage in a balancing analysis. They determine if there is a need to protect the employer’s legitimate business interests as weighed against the burden placed on the employee in making a living should the agreement be enforced.
Non-compete agreements must be reasonable in time length and geographic scope. The reasonableness of the agreement’s time length will depend facts unique to each case and business. For example, if the agreement seeks to protect secret competitively sensitive information, the time before the agreement expires should be no longer than when the information loses its value and is no longer useful for competing. The geographical area of the agreement must also be reasonable under the the circumstances. This depends on the area in which the employer and former employee engaged in providing services. If the employee only serviced the Chicago area it would likely be unreasonable to restrict employee from taking a new job that did not service any employees in that area and couldn’t use information or good will obtained from the former employer.
Non-Compete Agreements: Our Experienced Attorneys Can Help You
Employers have a right to protect their customer relationships and truly confidential information, but former employees must be able to earn a living and support themselves. When the employer and the employee have entered into a non-compete contract, their competing interests need to be weighed against each other.
If you have questions related to the enforcement of a non-competition agreement with a former employer, you can speak or email one of our attorneys.
Our Chicago non-compete agreement attorneys have defended high level executives in covenant not to compete and trade secret lawsuits. A case in which our firm defended a former Motorola executive was covered in Crain’s Chicago business. You can view that article by clicking here.
Lubin Austermuehle a firm of Chicago business dispute lawyers handles litigation over non-compete clauses for individuals and businesses of all sizes, including small or closely held businesses for whom competition from an ex-employee can be a serious threat. Our Chicago business lawyers with offices near Naperville, Oak Brook and Chicago have substantial experience in restrictive covenant and breach of contract cases, and we are proud of our record of strong results.
DiTommas-Lubin a Chicago business litigation law firm represents both plaintiffs and defendants in such cases, and can also help stop litigation before it starts by reviewing contracts to look for covenants and clauses that could create problems later. Based in Oakbrook Terrace and downtown Chicago, our Hinsdale and Kenilworth non-compete clause lawyers take cases from Grays Lake and Waukegan and many other cities throughout Illinois, as well as in Indiana, Wisconsin and the entire United States. To learn more or set up a free consultation, please contact one of our Chicago business trial lawyers through the Internet or call toll-free at 1-877-990-4990 today.