Many states have been cracking down on employee non-compete agreements lately. California has recently decided that workers who are already employed by a company cannot sign a valid non-compete agreement with that company without some sort of additional compensation. Signature of a non-compete agreement as a condition of getting hired, however, is common practice in the business world. The Illinois Appellate Court though, has just made a new ruling which changes all that.
The case is Fifield v. Premier Dealer Services and it involves an employee who worked for a subsidiary of a company which spun off of the parent company and was acquired by another firm. The employee lost his job as a result of the sale, but was then offered a job if he signed an agreement stating that he would not work for a competitor for two years after leaving the company. Within a few months of accepting the job, the employee quit and went to work for a rival company.
The decision reached by the Illinois Appellate Court was related to precedents in Illinois law that govern what happens when an existing employee is required to sign a non-compete agreement. These precedents state that, in such a situation, a worker who has been employed by the company for at least two years is considered to have received sufficient compensation for entering into a non-compete agreement.
Tony Valiulis, a partner at the Chicago law firm, Much Shelist P.C., which represented the plaintiffs, Eric Fifield and his new employer, Enterprise Financial Group, Inc., successfully argued that the same precedents should apply to newly hired employees.
Despite the fact that states across the country have been growing increasingly strict when it comes to worker non-compete agreements, the new Illinois rule has elements which go beyond what has so far been seen in other states. According to the new rule, even though the non-compete agreement was a condition of getting hired and the employee quit, a minimum of two years of employment is still required in order for the non-compete agreement to be enforceable.
The unanimous decision reached by the Illinois Appellate Court is going to mean a lot of changes to labor law in the state. Many labor lawyers have begun advising their clients to reassess their work agreements and to pay some sort of bonus or additional compensation to prevent their employees going to work for rival companies. “Employers will have to get creative with what they do,” said one Chicago labor attorney. “It can be a signing bonus, a year-end bonus” or another form of compensation.
Many are convinced that such restrictions are harmful to Illinois employers. Joel Rice, a partner at a Chicago law firm, said, “It isn’t a business-friendly rule.”
Others disagree, arguing that non-compete agreements might not be as beneficial for companies as they are commonly believed to be, particularly in sectors which are growing quickly. Massachusetts legislators are currently trying to restrict the use of non-compete agreements. According to P. Andrew Torrez, an attorney in Washington, this is because “tech startups will come to an area with an educated, mobile workforce and having people in that industry tied down makes it less desirable.” It seems that companies fail to consider what they have to gain by the removal of non-compete agreements, rather than what they have to lose.
At Lubin Austermuehle, our business trial attorneys represent business owners and professionals in non-compete 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. Call us at 630-333-0333 for a free consultation or contact us online by filling out our online contact form at the side of this blog or here.