Noncompetition Agreements
When it comes to noncompetition agreements, the State of Illinois is very employee-friendly. In 2013, the Illinois Supreme Court released a decision that established that the “totality of all of the circumstances” must be considered in order to ensure that a non-compete is reasonable. Factors to be considered in this analysis include, but are not limited to, the near-permanence of customer relationships, the employee’s acquisition of confidential information through employment, and time and place restrictions. No factor carries any more weight than any other, but rather its importance will depend on the specific facts and circumstances of the individual case.
Regarding time and place restrictions, although non-competes are generally enforceable for up to two years, the time restriction must be reasonable in relation to the business interest the employer seeks to protect. Illinois law also makes it clear that “employment alone, which is of less than two years duration, is inadequate consideration to support enforcement of a post-employment restrictive covenant.” This means that when a new employee enters into a noncompetition agreement, if that employee ends up working for the employer for less than two years, the postemployment restrictive covenant will not be enforceable due to inadequate consideration unless additional consideration such as a bonus is given to the employee at the time he or she enters into the noncompetition agreement.
Geographic limitations must also be reasonable. A court will look at the distance a customer will travel in a particular business. For example, while it might be considered reasonable for a customer to travel 30 miles to see a doctor, it is might be considered unreasonable to expect a customer to travel that far to see a hair stylist. Therefore, a 30 mile restrictive covenant for a hair stylist might be deemed unreasonable.
If your business has its employees enter into non- competition agreements or is considering doing so, or if you are an employee who has been asked to sign such an agreement, please contact us.