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12/23/2014

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Non-Compete Clauses: Illinois law and Your Non-Compete Clause

12/10/2014

The Fifield case caused much controversy in the legal community, but Neal C. Zazove & Associates is here to explain the confusion and remedy your concerns about Illinois law regarding Non-Compete Clauses.

What does this mean FOR ME as an
EMPLOYEE or EMPLOYER?

The Appellate Court’s ruling can be analyzed from two different perspectives. Employer’s should review their noncompete agreement and find a way to strengthen their restrictive covenants to adhere to new Illinois law and be deemed enforceable. To be deemed enforceable, it may be necessary for employers to consider offering various forms of alternative consideration. For instance, offering stock options, severances, and annual bonuses are values of consideration, as are promotions and job title changes. Furthermore, it is important for employers to make sure noncompete clauses adhere to the reasonableness standard of Illinois law. It may be beneficial for employers to adhere to a different legal forum and consider another state law to govern its noncompete agreement.

An employee should be cognoscente of the fact that because of Fifield, many employers will be using different forms of consideration to adhere to Illinois law. It may be important to review your noncompete clause and determine what legal rights you may have if, when, and how you choose to leave your employer.

**What happened in Fifield v. Premier Dealer Services Inc.?**

      Eric Fifield was an employee of Great American Insurance Company and assigned to work exclusively for Great American’s subsidiary, Premier Dealership Services. Before his employment with Premier, as a condition of his employment, Fifield signed an “Employee Confidentiality Inventions Agreement,” which included a noncompete clause. The agreement stated that Fifield would be restricted from working for Premier’s competitors for two years following Fifield’s leaving the company. An additional provision was added to the agreement. Specifically, that the noncompetition provision would not apply if Fifield were terminated without cause during the first year of his employment. After signing the agreement, Fifield worked for Premier over the next three months.

      At the end of three months, Fifield resigned with two weeks notice, and began working for Enterprise Finance Group (“EFG”). Shortly thereafter, Fifield and EFG filed for declaratory relief under section 2-701 of the Illinois Code of Civil Procedure, claiming that the noncompete clause was invalid and unenforceable due to lack of consideration. After oral arguments and motions, the Appellate Court affirmed the circuit court’s decision, in favor of Fifield and EFG.

Illinois Appellate Court’s reasoning for this decision

      Iinois courts carefully scrutinize postemployment restrictive covenants because they operate as partial restrictions on trade. In order for such covenants to be valid and enforceable by an employer, the terms of the covenant must be reasonable. (Cambridge Engineering, Inc. v. Mercury Partners 90 BI, In, Inc., 378 Ill. App. 3d 437, 447, 879 N.E.2d 512, 316 Ill. Dec. 445 (2007)). The Appellate Court focused its attention solely on whether there was adequate consideration to support a restrictive covenant in the noncompete agreement.

      Generally, Illinois law states that when an employee has worked for a “substantial period of time,” sufficient consideration is met, and the employer can enforce the noncompete clause. In the past, various Illinois courts have upheld the notion that two years constitutes adequate consideration, but seven months does not. (Brown & Brown, Inc v. Mudro, 379 Ill. App. 3d 724,728,887 N.E.2d 437, 320 Ill. Dec. 293 (2008)). The court further noted that how the employee leaves the company, whether voluntary or by termination, is irrelevant. The court concluded that being employed slightly longer than three months is far too short of the two-year requirement by Illinois law for adequate consideration.

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Happy Holidays!

Happy Holidays from Neal C. Zazove & Associates, P.C.

Non-Compete Clauses: Illinois law and Your Non-Compete Clause

What does this mean FOR ME as an EMPLOYEE or EMPLOYER?

﻿﻿What happened in Fifield v. Premier Dealer Services Inc.?﻿﻿

Illinois Appellate Court’s reasoning for this decision

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What does this mean FOR ME as an
EMPLOYEE or EMPLOYER?

**What happened in Fifield v. Premier Dealer Services Inc.?**