Non-compete agreements are a common tool used by employers to protect their business interests. However, these agreements must strike a balance between safeguarding legitimate business concerns and respecting an employee’s right to pursue their career. Over the years, Illinois courts have issued several crucial decisions that provide guidance on the enforceability of non-compete agreements. In this blog post, we’ll explore some of these key Illinois court decisions and their implications for both employers and employees.
Recent Illinois decisions on non-compete agreements have clarified several important points:
1) Non-compete agreements under Illinois law are only enforceable if they protect a party’s legitimate business interests, as determined from the totality of the circumstances. This includes the near-permanence of customer relationships, the employee’s acquisition of confidential information through their employment, and time and place restrictions. Illinois law requires that in order be enforceable, a covenant not to compete must secure a “protectable interest” of the employer. Illinois courts recognize at least two such protectable interests: (1) where the customer relationships are near-permanent and but for the employee’s association with the employer the employee would not have had contact with the customers; and (2) where the former employee acquired trade secrets or other confidential information through his employment and subsequently tried to use it for his own benefit.
2) Non-compete provisions in employment agreements, which restricted distributor’s employees from engaging in post-employment activities of soliciting or inducing other employees to leave distributor’s employment, were found invalid restraints on trade, in that, provisions did not serve to protect any legitimate business interest recognized under Illinois law.
3) Non-compete clauses in employment agreements are unenforceable when they (1) impose restrictions greater than those necessary to protect legitimate interests of the protected party, (2) are oppressive to the restricted party, or (3) are harmful to the general public. Such was the case in Mickey’s Linen v. Fischer where Illinois decisions supported modifying a non-solicitation provision to cover only those customers for which the former employee had responsibility, and that the severability provision in Fischer’s Employment Agreement makes that result particularly appropriate.
4) In Unisource Worldwide, Inc. v. Carrara, the court ruled that where an employment contract is ambiguous and unintelligible, the non-compete clause in the agreement is unenforceable because there is no definite agreement on the essential terms of the restrictive covenant.
5) Lastly, in Vencor, Inc. v. Webb, the court found that a non-competition agreement is not contrary to the fundamental public policy of the state of Illinois, and thus Illinois law must govern this dispute. Here, both parties elected to have the agreement governed by Kentucky law, and the court discerned no reason why an Illinois court would find the agreement to be contrary to Illinois public policy.
Illinois court decisions on non-compete agreements have evolved to strike a balance between safeguarding legitimate business interests and protecting the rights of employees. Employers must carefully craft non-compete agreements that are reasonable in terms of duration, geographic scope, and the scope of activities restricted. Adequate consideration is a crucial factor, especially when entering into non-compete agreements with at-will employees.
For employees, understanding the enforceability of non-compete agreements and their rights is essential. Consulting with legal counsel is advisable when faced with the prospect of signing a non-compete agreement or when challenging the enforceability of an existing agreement.
These court decisions have helped shape the landscape of non-compete agreements in Illinois, emphasizing the importance of fairness and reasonableness in these contractual arrangements. It’s crucial for both employers and employees to stay informed about these legal developments to ensure that their rights and interests are protected. Continue reading ›