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The Enforceability of Non-compete Clauses in Illinois

The Enforceability of Non-compete Clauses in Illinois

Non-compete agreements are among the most disputed and litigated documents in employment law. Employers can be unrealistic with their expectations when trying to enforce them and employees can be quick to sign them when starting new jobs, but slow to comply with their requirements when their working relationship with the employer is over. These clauses generally serve two purposes:

  • To protect employer’s trade secrets from competitors; and
  • To prevent employees, upon separation of employment, from working for competitors and providing competitors with the company’s trade secrets.

Disputes over these agreements generally center on the interpretation of trade secrets and the reasonableness of preventing an employee from going to work with a competitor. Reliable Fire Equipment Company v. Arredondo, a 2011 case before the Illinois Supreme Court, cast a bright light on the legalities of non-compete agreements. Since this case, the courts have taken a different approach when determining non-compete clauses’ validity.

Facts of the Reliable Fire Equipment Company v. Arredondo

  • The defendants in the case were employed as sales representatives for a company that sold fire extinguishers and other types of safety equipment. As a condition of employment, they both signed non-compete clauses, stating that they would not compete with the company within Illinois, Iowa or Wisconsin throughout their employment and for up to one year after separation from the job;
  • One of the employees quit his position to start his own fire extinguisher business and the other was fired from the company because supervisors suspected that he was competing with the company for business;
  • The company filed a suit against one of the workers for violation of the non-compete agreement;
  • The court ruled in favor of the business, but provided some guidelines for considering the reasonability of future non-compete clauses, including:
    • The clause may not reach any further than what is required to protect a legitimate business interest;
    • It may not impose undue hardship on the employee; and
    • The terms of the clause may not injure the public in any way.

Non-compete Clauses for New Hires

In 2013, the Illinois Appellate Court threw another guideline into the non-compete arena by ruling in favor of an employee who signed a non-compete agreement and then left the company within two years to work for a competing organization. The court held that the clause was unenforceable and advised employers that new workers cannot be stopped from working for a rival company until they had been with the employer for two years. If a worker leaves before this deadline, the employer must provide some compensation to enforce the clause.

Across the country, many states are placing substantial restrictions on the enforceability of non-compete clauses, including Michigan, California, Florida and Oregon. In Texas, the trend has reportedly been to enforce the agreement, but to rewrite it to include only provisions that are necessary to prevent competitors from gaining an unfair advantage. If the Illinois courts follow suit, employers in this state will need to reevaluate the enforceability of their non-compete clauses.

Work with a Chicago Employment Attorney

If you are an employer trying to enforce a non-compete clause, or an employee looking to dispute an agreement, contact an experienced and knowledgeable employment attorney. Call the Law Office of Mitchell A. Kline today for your legal consultation.

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