Illinois Strikes Down Restrictive Covenant
On June 24, 2013, an appellate court in Illinois made it more difficult for Illinois employers, including those in the automotive industry, to enforce non-solicitation and non-competition provisions. Specifically, the court determined that such restrictive covenants won’t be enforceable unless the employee in question works for at least two years after signing the restrictive covenant. Generally speaking, like all contracts, there must be sufficient consideration for courts to enforce restrictive covenants. The Illinois court determined that, in the employment setting, there would not be enough consideration for enforcement until an employee had been employed for two years.Several key facts make this case notable. First, the restrictive covenants in question were agreed to upon the start of new employment, not some months or years after the employee had begun working for the company. Even so, the court still required two years of employment before there would be adequate consideration. Second, the employee had negotiated the terms of the restrictive covenant and successfully had them altered to his benefit before accepting the new employment. Despite this, the court still refused to enforce the restrictive covenants. Third, the court determined that it was irrelevant whether a restrictive covenant is negotiated before or after employment begins — either way, it would be a “post-employment” restrictive covenant.
Practically speaking, this means that an Illinois employer will be unable to enforce any non-solicitation or non-competition clauses in an employment agreement if an employee leaves to go work for a competitor before reaching his or her two year anniversary with the employer. This is the case even if the agreement is entered into at the inception of employment. This case is likely to be appealed but, until then, employers should use caution when hiring and considering enforcement of non-solicitation or non-competition clauses.