After signing a non-compete agreement with his employer, president of a consulting firm resigned after less than a year, joined a competitor, and began to solicit his former clients and employees. The consulting firm sued, arguing that the ex-employee was bound by the terms of the non-compete and had breached his employment agreement. The Illinois Appellate Court found that the noncompete clause was unenforceable because the employee had not worked for at least two years after signing it, and the only consideration given in exchange for agreeing to the noncompete was continued employment.
Axion RMS, Ltd. is a company specializing in insurance brokerage and employee benefits consulting services. Michael Booth was hired by Axion in October 2010 as Vice President of Sales. He was later promoted to President of Axion in 2014. Booth and Axion entered into an employment agreement when he was hired, and the agreement included a noncompete clause that restricted Booth from soliciting Axion’s clients or employees during his employment and for a period of two years following termination of his employment.
In December 2015, Booth resigned from Axion in order to begin work with at HUB International Limited, a competitor of Axion. Axion later sued, alleging that, shortly after joining HUB, Booth began directly or indirectly contacting and soliciting Axion’s existing clients and customers, as well as several Axion employees. Booth filed a motion to dismiss the complaint in the circuit court. In his motion, Booth cited several cases from the Illinois Appellate Court which held that, where the only consideration given to an employee in exchange for signing a non-compete agreement is continued employment, the employee must work for at least two years after signing the covenant in order for there to be adequate consideration. Booth argued that, as he had resigned from his position less than a year after agreeing to the non-compete, it was unenforceable.
Axion argued that the court should not adopt a bright-line test of two years of employment, and instead should consider the totality of the circumstances. Axion argued that Booth’s promotion to president and receipt of equity in Axion should be taken into account when considering whether there was adequate consideration for the non-compete covenant. The circuit court rejected Axion’s argument. The court found that, though it was possible that the Illinois Supreme Court would soon adopt a totality of the circumstances approach, at the time of considering the motion, such an approach had not been adopted and the bright-line rule was therefore binding on the circuit court. Axion then appealed.
The Illinois Appellate Court panel began by addressing whether the circuit court erred in dismissing Axion’s complaint for breach of contract. The panel found that Axion had pled only continued employment as consideration for the noncompete that Booth signed, and that, under existing case law, this was inadequate consideration. The panel stated that there was no possible set of facts which would render the noncompete clause in the employment agreement enforceable. The panel determined, therefore, that the circuit court did not err in dismissing the case.
Axion finally argued that the circuit court erred in denying it leave to file an amended complaint. The panel also rejected this argument. The panel stated that portions of Axion’s proposed amended complaint were inconsistent with similar paragraphs in its first, verified complaint, and that, as a verified complaint is made under oath, it cannot be casually changed in order to circumvent a motion to dismiss. The panel, therefore, affirmed the decision of the circuit court.
You can view the decision here.
If you are an employer seeking to enter a settlement agreement with an employee or you are an employee being asked to sign a settlement agreement, it is always advisable to seek the assistance of experienced employment and law discrimination attorney. Our Winnetka employment law, wage and hour, and non-compete agreement attorneys have more than three decades of experience representing individuals and businesses of all sizes, including small or closely held businesses for whom competition from an ex-employee can be a serious threat. Lubin Austermuehle a firm of Chicago employment and business dispute lawyers have defended high-level executives and represented classes of hourly workers in wage violation cases. 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.
Our Chicago business litigation lawyers with offices near Wheaton, Oakbrook Terrace and Schaumburg have substantial experience in restrictive covenant and breach of contract cases, and we are proud of our record of strong results. Our Chicago non-compete agreement attorneys represent 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 Elgin and downtown Chicago, our Lake Bluff and Lake Forest non-compete clause lawyers take cases from Hinsdale and Oak Park 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 dispute lawyers through the Internet or call toll-free at (833) 306-4933 or locally at (630) 333-0333 today.