Illinois non-compete law continues to wend a circuitous path through the employment landscape, making it occasionally difficult for employers and employees alike to predict outcomes in these cases.
One issue that has arisen with some frequency concerns the matter of consideration for a restrictive covenant with an employee where the only consideration provided is employment: namely, is mere employment sufficient, or must there be something “else?”
In 2013, this question arose in the Illinois appellate court with jurisdiction over Cook County (Chicago) in Fifield v. Premier Dealer Servs., 2013 IL App (1st) 120327. The restrictive covenant there actually was more generous than many, providing that it would not apply if Mr. Fifield was terminated without cause during the first year of his employment (seemingly providing some consideration other than mere employment). The First District concluded that an employee must remain employed for at least two years in order for a restrictive covenant to be enforceable. And, it does not matter whether the employer or employee ended the relationship – Mr. Fifield, the employee, had resigned his position. The Illinois Supreme Court declined to hear the case on a petition for leave to appeal.
The court’s holding arguably can be interpreted to apply only where the sole consideration provided was employment, because the written opinion does not reflect whether Premier Dealer Services argued that other consideration was provided, such as training, a bonus, stock or access to confidential information. The inapplicability of the covenant if the employer terminates the employee before at least 12 months of employment similarly is not sufficient. The Illinois Appellate Court for the Third District has since followed this decision, applying the two-year rule to strike down a restrictive covenant in the absence of other consideration, where the employee served for only nineteen months. Prairie Rheumatology Assocs., S.C. v. Francis, 2014 IL App (3d) 140338. Neither opinion addresses whether other elements of consideration may suffice to shorten the two-year period.
While these decisions represent binding precedent on the courts within their jurisdictions (Chicago, and 21 other counties), they represent only persuasive authority for the rest of Illinois, including the three federal district courts that serve the state. The decisions have not led to predictable results in these other courts.
In two recent Chicago federal cases, the courts rejected the two-year rule and found shorter periods sufficient. See Bankers Life & Casualty Co. v, Miller, Case No. 14 C 3165, 2015 WL 515965 (N.D. Ill. Feb 6, 2015) (Shah, J.) (rejecting two-year rule, denying a motion to dismiss); Montel Aetnastak, Inc. v. Miessen, 998 F. Supp. 2d 694, 716 (N.D. Ill. 2014) (Castillo, C.J.) (finding 15 months sufficient).
In contrast, two other federal decisions, one from Chicago and the other from Peoria, predicted that the Illinois Supreme Court would go the other way and adopt the two-year rule. See Instant Tech., LLC v. DeFazio, Case No. 12 C 491, 2014 WL 1759184 (N.D. Ill. May 2, 2014) (Holderman, J.) (striking down covenants with shorter employment periods); Cumulus Radio Corp. v. Olson, Case No. 15 C 1067, 2015 WL 643345 (C.D. Ill. Feb. 13, 2015) (McDade, J.) (15 months not sufficient).
Thus, this is an area of law that continues to evolve in Illinois. A practitioner faced with one of these cases must take care to examine the consideration provided for the covenant, take stock of the jurisdiction in which the case is pending, and be creative in offering any relevant consideration arguments while at the same time preserving any serious issue for appeal given the current state of these matters.
