Unfortunately, sometimes people will take advantage of others’ businesses, using their private information or customers to profit on their own. You may have heard of certain agreements issued in order to help protect a business from these practices, such as non-competition and non-solicitation agreements. However, while helpful, not every one of these agreements is actually valid and enforceable under Illinois law. Rather, it depends upon the specifics of the case, including the content of the agreement, the employment, separation of such, and both parties’ conduct afterwards.
Is There Adequate Consideration?
In order to make any type of restrictive agreement, there must be something of value given in exchange. This “something” is referred to as “consideration,” and must be found to be adequate. Sometimes the continued employment of an employee is found to be adequate consideration for a restrictive agreement. Illinois courts have ruled that employment of fewer than two years is not adequate.
Determining Enforceability
So how exactly do Illinois courts determine whether an agreement such as a non-competition or non-solicitation agreement is enforceable? They use a three-prong test. In other words, the court looks to three requirements that must be met in order to determine that it is enforceable (assuming that there is a valid employment relationship in place). A restrictive agreement is considered reasonable and is enforceable if its restriction(s) are:
- Necessary but not more restrictive than is required to protect an employer’s legitimate business interest;
- Do not impose an undue hardship on the employee; and
- Do not injure the public.
What is a Legitimate Business Interest?
If a restrictive agreement must be in place for the purpose of protecting a legitimate business interest of an employer, what constitutes such? Legitimate business interests for purposes of enforceability include things such as:
- Confidential information
- Trade secrets
- Customer relationships
The court looks at various factors in determining whether one of these interests has been breached:
- Whether the employee acquired the confidential information during his or her employment;
- What the time and place of the restrictions were; and
- The permanence of customer relationships.
None of these factors are more valuable or hold more weight than the others. This examination is not black and white but rather an assessment of all of the facts involved in the specific case.
The Reasonableness of the Restrictions
In order for the restrictions to be considered enforceable, they must also be considered reasonable in terms of time, place, and activity involved. For example, it would almost certainly be considered unreasonable if a marketing manager was restricted from engaging in marketing activities for other clients within 1000 miles of the employer, for a period of 10 years. However, ultimately it is up to the courts to decide whether or not a restriction is reasonable.
Illinois’ Non-Compete Law
New Illinois legislation, currently pending in the state’s General Assembly, would significantly change non-competition laws and agreements within the state. House Bill 789 (HB 789), if passed (which is likely to some degree), would go into effect on June 1, 2021, amending the current Illinois Freedom to Work Act.
HB 789
If HB 789 passes it will:
- Provide that non-competition and non-solicitation agreements are invalid and unenforceable for any employee:
- Whose annual income is below a certain level, or
- Who is terminated because of COVID-19-related circumstances;
- Require employers to advise employees to consult with their own legal counsel before signing restrictive covenant agreements; and
- Make employers liable for attorneys’ fees incurred by employees who prevail in restrictive covenant enforcement litigation.
With employment law ever-changing, whether you are an employer or an employee, it’s in your best interest to consult with a knowledgeable and experienced Deerfield Employment Attorney who knows the law and can help you obtain your goals.
Contact Our Deerfield Employment Agreement Attorney Today!
If you are engaged in a non-competition or non-solicitation agreement that you feel is unreasonable, or if you are looking to establish such an agreement and want to ensure that it is reasonable and therefore enforceable, the attorneys at ST Legal Group can help. To learn more, or to schedule a consultation, contact us today!