Recently, Illinois courts have ruled that non-competition and non-solicitation agreements are unenforceable if the employee has not remained employed for a bright line of two years. This is a marked change from previous cases that did not impose a bright-line test.
In Fifield v. Premier Dealer Servs., Inc., 2013 IL App. (1st) 120327, the Illinois Appellate Court for the First District found that a former employee’s nonsolicitation and noncompetition agreement lacked consideration because the employee resigned after only three months. The court reasoned that since the employee was at-will, mere employment, in and of itself, is not enough to render the agreement valid, unless the employee remained with the company for two years. In so holding, the court found that this rule did not depend on contracts signed pre-employment or post-employment, nor did it depend on whether the employee resigned or was terminated.
Likewise, in Prairie Rheumatology Assoc. v. Francis, 2014 IL App. (3d) 140338, decided on Dec. 11, 2014, the Illinois Appellate Court for the Third District relied on Fifield in invalidating an employment agreement provision that restricted post-employment competition.
In Prairie, the former employee doctor had agreed to this provision as a condition of her employment in the plaintiff’s medical practice, but then resigned after 19 months. The court, citing the bright-line rule, found that there was no adequate consideration since the doctor was not employed for two years. The court also rejected the plaintiff’s attempt to argue that other consideration was provided, such as patients and consideration for partnership, calling these items “illusory.”
The Illinois rule creates problems for employers. Merely hiring an employee is not enough to justify a non-competition or non-solicitation agreement. There must be something more, whether in the form of two years of continued employment (without exception) or tangible value given to the employee at the time of hire. And, as to the latter category, Prairie illustrates that courts will analyze this value with a strict lens. To date, employee confidentiality agreements remain enforceable. Therefore, requiring employees to sign carefully drawn confidentiality agreements, and taking reasonable steps to protect confidential information, should be a priority for employers.
Taft is monitoring this changing area of law and will provide future updates. Taft attorneys are also ready to help existing and future clients navigate these legal issues.