There is a judicial split between federal judges in the Northern District of Illinois and the Illinois Appellate Court, First District, on the issue of whether two (2) years of continued employment is required for adequate consideration to support a non-competition provision in an employment contract under Illinois law. So far, some decisions indicate that that the Northern District of Illinois (federal) court, which covers Cook, Du Page, Lake, and Will counties, seem to be blazing their own trail in conflict with Illinois Appellate State Court decision in Fifield v. Premier Dealer Services., 2013 IL App (1st) 120327.
Businesses and employers fear what can or will happen after an employee leaves their employment after being been exposed to a company’s proprietary information, private sales and marketing data, customer contact lists and other sensitive business information. Employers often attempt to minimize that risk after an employee departs by having the employee sign a non-compete covenant that bars an employee for a reasonable amount of time from working for an industry competitor who could benefit from the ex-employees’ knowledge of that past employer’s proprietary business data and information.
In an ever-changing economy, many employees nowadays may not stay employed for a long period of time, and may leave a company after months of being initially hired. These same employees then seek to have courts declare their non-compete agreements unenforceable because they worked for a short period of time and in most cases, that time argued is less than two (2) years. They also argue the non-compete covenant, in part, because the employer offered them no additional consideration (i.e. signing bonus, stock, stock options, or other benefits), beyond mere employment, to support binding them to a non-compete covenant agreement.
In Fifield, the Illinois First Appellate District, which is a state court covering Cook County (including Chicago), held that an employee must generally remain employed for at least two years in order for a restrictive covenant to be enforceable. So in Fifield, the Court ruled that a non-compete covenant as unenforceable as the employee had only worked for the company for three and half (3 ½) months. That decision applies in Cook County, and has also since been followed in the Illinois Third District, which covers 20+ counties in North-Central Illinois.
The Northern District of Illinois, on the other hand, has entered its own rulings that are contrary to Fifield. In Traffic Tech, Inc. v. Kreiter, 2015 WL 9259544, at * 5 (N.D. Ill. Dec. 18, 2015), did not follow Fifield, and refused to find a lack of consideration as a matter of law where the employee, among other things, worked for nine (9) months. Accordingly, there remains a lack of uniformity in Illinois regarding the application of the two year rule, and employers must be careful to understand whether it applies to a specific employee. In a separate decision after Fifield, entered by a different Northern District of Illinois Judge in Montel Aetnastak, Inc. v. Miessen, Case No. 13 C 3801 (N.D. Ill., Jan. 28, 2014, the Court ruled a non-compete covenant was enforceable where the employee worked for that defendant/company for fifteen (15) months.
Because the Illinois Supreme Court has not ruled on this less than 2 year issue, federal courts appear to be issuing rulings contrary to Fifield because, in part, of the Illinois Supreme Court lack of a ruling. If and when the Illinois Supreme Court makes a ruling on this topic, the legal landscape on non-compete covenants, and length of time worked by an employee to make them enforceable, will certainly change.
While businesses wait for the Illinois Supreme Court to rule, businesses and employers can improve the chances of having their non-compete covenant upheld as to employees working 2 years or less for them, in part, by providing employees other forms of consideration beyond mere employment. The types of additional consideration to be offered to an employee, in exchange for them signing a non-compete covenant, will vary from industry to industry and there is no black and white answer as to what type of consideration a federal or state court will deem to suffice to bind an employee to a non-compete covenant who works for 2 years or less for an employer.
Tailoring your non-compete covenants and determining what forms targeted additional consideration should be provided to your new employee(s) are discussions best had with an experienced labor and employment attorney such as the attorneys at Waltz, Palmer & Dawson, LLC. Should you have any questions about this or any other laws that may affect your business, or would like to schedule a free initial consultation, please contact Waltz, Palmer & Dawson, LLC at (847)253-8800 or contact us online.
Waltz, Palmer & Dawson, LLC is a full-service law firm with various areas of service to assist your business, including: Employment Law, Intellectual Property, Commercial Real Estate, Business Immigration, Litigation and general Business Law services. Individual services include Estate Planning, Wills and Trusts, Probate, Guardianship, Divorce and Family Law.
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