Illinois Supreme Court Denies Invitation to Review Restrictive Covenant Case

A company bought a business that marketed finance and insurance products to the automotive industry. After the sale, the company made an employment offer to an employee, subject to the employee's agreement to a two-year non-solicitation and non-competition covenant. The employee specifically negotiated a provision that the covenant would not apply if he was terminated without cause during the first year of his employment. The employee started with the company on November 1, 2009 and gave his two-week notice on February 1, 2010. The court held that a job offer itself, standing alone, is not sufficient support for a restrictive covenant unless there has been a period of substantial employment. Additionally, the court went on to create a new bright-line rule that "substantial employment" is a period of two years or more. Many observers believed the holding starkly diverged from established case law and hoped the issue would be taken up by the Illinois Supreme Court. On September 25, 2013, the Illinois Supreme Court denied the defendant's Petition for Leave to Appeal. Employers should evaluate the status of the restrictive covenants currently in place with employees and determine whether additional consideration is required in light of this holding.

For more information read Fifield v. Premier Dealer Services, Inc., No. 1-12-0327 (Ill. App. Ct. Jun. 24, 2013).

U.S. Supreme Court: State Court Should not have Ruled on Validity of Noncompete Clause; Issue Was for Arbitrator

The U.S. Supreme Court held that the Oklahoma Supreme Court erroneously struck down a noncompete agreement, declaring it invalid under state law. The problem with the state court's decision, however, was that there was an arbitration agreement in the employer's employment agreements; thus, the U.S. Supreme Court found that the state court should have allowed an arbitrator to determine whether the non-compete was valid or not.   More ›

Illinois Supreme Court Shifts the Playing Field for Non-Compete Agreements

For 36 years, agreements in which Illinois employees agreed to refrain from competitive activity following termination of employment have been judged under a standard requiring the employer to prove that it had a legitimate business interest for restricting post-employment competition. Two Illinois appellate decisions in 2009-2010 rejected this requirement, concluding that it had been invented by the appellate courts and never endorsed by the Illinois Supreme Court. On December 1, 2011, in Reliance Fire Equipment Co. v. Arredondo, No. 11871, the Illinois Supreme Court put that idea to rest, holding that it has been a part of Illinois law for over a century. This was the first Illinois Supreme Court decision considering what business interests could justify a non-compete agreement since the early 1970s. This issue dominated litigation over these agreements throughout that period. More ›