Illinois Court Of Appeals: Non-Competes Unenforceable Without At Least Two Years Of Continued Employment

by Stinson Leonard Street
Contact

In Fifield v. Premier Dealer Services, Inc., the Illinois Court of Appeals covering Chicago held that as a matter of law, an at-will employee must remain employed for at least two years to receive consideration sufficient to support a restrictive covenant. Consideration remains a hot-button issue because certain courts have determined that a promise of continued at-will employment is an illusory benefit. The bright-line rule in Fifield demonstrates the importance of knowing the law of the particular state that will govern enforcement of a restrictive covenant.

Fifield began his employment with the defendant on November 1, 2009. As a condition of his employment, Fifield signed an employment agreement that contained a two-year nonsolicitation and noncompetition covenant. Fifield also negotiated a provision voiding the restrictive covenant if Fifield was terminated without cause during the first year of his employment (the "first-year provision"). On February 12, 2010, slightly more than three months after his employment began, Fifield resigned from his position with defendant and soon after began working for a competitor.

Fifield and his new employer filed suit in Cook County, Illinois seeking a declaration that that the restrictive covenant was unenforceable for lack of consideration. The trial court ruled in favor of Fifield and the Court of Appeals upheld the ruling. The Illinois Supreme Court declined to hear the appeal from that decision.

Under Illinois law, and the law of most states, in order for a restrictive covenant to be enforceable it must be reasonable, ancillary to a valid contract, and supported by adequate consideration. Prior to Fifield, under Illinois law, continued employment for a "substantial period of time beyond the threat of discharge" was sufficient consideration, but "substantial period" was not defined. After Fifield, at least in Cook County, Illinois (the First Appellate Division), the bright-line minimum is two years of continued employment.

In reaching its holding, the Court of Appeals rejected the former employer's argument that, because Fifield signed the agreement before beginning his employment, the employment itself was sufficient consideration for the agreement. According to the court, no distinction is permitted between new hires and existing employees. The court further held that the two-year standard applies even if the employee resigns on his own instead of being terminated. Finally, the court determined that the first-year provision in Fifield's agreement did not affect the application of the two-year rule, meaning the two-year minimum cannot be shortened by agreement.

Implications

The Fifield decision applies only to the question of whether continued employment is sufficient consideration. It does not preclude other forms of consideration, such as payment of a bonus or some other valuable exchange. Such options should always be considered, particularly in Illinois. Moreover, the ruling is limited to Illinois. Many other states, including Kansas and Missouri, hold that continued employment for any length of time does constitute sufficient consideration to support enforcement of a restrictive covenant.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Stinson Leonard Street | Attorney Advertising

Written by:

Stinson Leonard Street
Contact
more
less

Stinson Leonard Street on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.