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Total Articles: 21

Illinois Attorney General Wages War Against Low-Wage Non-Competes

Last week, the Attorney General of Illinois filed suit against Check Into Cash, LLC, alleging that the payday lender required its low-wage customer service employees to agree to illegal non-compete agreements in violation of Illinois law. The lawsuit is another example of the Attorney General’s fight against illegal non-competes and marks the first time the Attorney General has brought a claim under the Illinois Freedom to Work Act, 820 ILCS 90/1.

Illinois Statute Bars Non-Competes For Low-Wage Workers

Illinois has a new non-compete statute that bans the use of non-compete agreements with “low-wage” employees.

Low-Wage Employees in Illinois Protected From Noncompetes Under New Law

On August 19, 2016, Illinois Governor Bruce Rauner signed a bill prohibiting noncompete agreements for low-wage employees. In addition to prohibiting most private-sector employers from entering into noncompetes with its low-wage employees, the Illinois Freedom to Work Act (the Act) renders “illegal and void” any “covenant not to compete entered into between an employer and a low-wage employee” after the effective date of January 1, 2017.

Attorney General Madigan Sues Jimmy John’s over Non-Compete Agreements

On Wednesday, Illinois Attorney General Lisa Madigan filed suit against fast-food franchisor Jimmy John’s and several Jimmy John’s franchisees operating in Illinois claiming that Jimmy John’s and its franchises unlawfully require at-will, low-wage employees to sign non-compete agreements. The complaint asserts that at the time of hire, Jimmy John’s employees—including delivery drivers and sandwich makers—are required to sign non-compete agreements.

Consideration for Non-Competes in Illinois: You’re Better Off in Federal Court

The saga of “What consideration is adequate?” in Illinois continues. What has become clear is that federal courts are more forgiving than Illinois state courts on this issue.

Illinois Appellate Court Finds Non-Compete Restrictions Over-Reaching and Affirms Court Decision Not to Blue Pencil

A recent decision from an Illinois Appellate Court suggests that employers with non-compete agreements “built to scare” may end up with an unenforceable contact and even the loss of confidential information under Illinois law. AssuredPartners, Inc. v. Schmitt (October 27, 2015 1st Dist.)

Illinois Court Leaves Former Employer Without Remedy After Invalidating Its Overly Broad Restrictive Covenants

Just days before Halloween, the Illinois Appellate Court sent a scary message to employers: We will not enforce or judicially modify your overly broad restrictive covenants! In AssuredPartners, Inc. v. Schmitt, No. 13 CH 19264 (October 26, 2015), the Illinois Appellate Court affirmed a circuit court’s holding that an employer’s restrictive covenants were overbroad and unreasonable as a matter of law. Adding insult to injury, the appellate court also affirmed the court’s refusal to judicially modify the restrictive covenants, despite the parties’ agreement authorizing judicial modification. That decision left the employer holding a bag of rocks.

Some Clarity to What is Sufficient Consideration for Non-Competes in Illinois

Since the much-discussed Fifield case from the Illinois appellate court two years ago, all that could be said with confidence was that, unless someone was employed for at least two years after signing a restrictive covenant agreement, its enforceability was highly questionable. Practitioners in Illinois have been recommending that employers provide consideration in addition to employment, such as a “sign on” bonus tied to the restrictions or any other consideration that would not be given but for the individual’s agreement to the restrictions. In the next breath, practitioners have been telling their clients that even the additional consideration might not be enough to bind employees employed for less than two years. Uncertainty is everyone’s enemy in this area, and there has been great uncertainty for the past two years. But that uncertainty recently has been reduced by the same appellate court’s ruling in McInnis v. OAG Motorcycle Ventures, Inc. decided June 25, 2015 by the Illinois Appellate Court for the First District, albeit by a 3-judge panel different from the panel that decided Fifield.

"Bright Line" Gets Blurry: Federal Judge Rejects Illinois Appellate Court Ruling that Two Years of Employment is Necessary Consideration for Restrictive Covenant Enforcement

On February 6, 2015, a federal judge in the Northern District of Illinois rejected the Illinois First District Appellate Court’s holding in Fifield v. Premier Dealer Services, the 2013 decision which held for the first time that an employee must work for at least two years after signing a restrictive covenant agreement for the continued employment to constitute adequate consideration. The decision raises the possibility that the Court of Appeals for the Seventh Circuit will review the issue, as three federal district judges now disagree over the viability of the “bright line rule.” While this decision provides a ray of hope for employers seeking to enforce non-competes in Illinois, Fifield remains binding precedent that will be applied by Illinois courts. Employers seeking definitive guidance on the consideration necessary to support a non-compete will need to wait until the Illinois Supreme Court issues a definitive ruling.

Are Your Restrictive Covenants Enforceable In Light Of The Illinois Supreme Court’s Appeal Denial Of Fifield?

Continuing the saga of whether continued employment is sufficient consideration to support a restrictive covenant agreement, the Illinois Supreme Court, on September 25, refused to review Fifield v. Premier Dealer Services, Inc., No. 1-12-0327, 2013 IL App (1st) 120327 (Jun. 24, 2013)—a controversial Illinois Appellate Court decision on the enforceability of restrictive covenants. The Illinois Supreme Court’s decision means that Fifield’s mandate that two-years of continued employment is required for an employer to enforce a post-employment restrictive covenant is now binding precedent in a large part of Illinois.

Illinois Supreme Court’s Refusal to Review Restrictive Covenant Decision Leaves Employers with Uncertainty

The Illinois Supreme Court’s recent refusal to review the Illinois Appellate Court’s controversial decision in Fifield v. Premier Dealer Services, Inc., No. 1-12-0327, 2013 IL App (1st) 120327 (Jun. 24, 2013) leaves employers with uncertainty about the appropriate consideration to support employee restrictive covenant agreements at hire.

Focus On Restrictive Covenants: Illinois Supreme Court Rejects Petition for Leave to Appeal in Fifield

In July 2013, we reported on the decision by the Illinois Appellate Court for the First District in Fifield v. Premier Dealer Servs., Inc., No. 1–12–0327, 2013 WL 3192931 (June 24, 2013). The Appellate Court ruled that there must be at least two years or more of continued employment to constitute adequate consideration in support of a restrictive covenant where no other consideration is provided. See id. at *4–5. The court’s ruling applies to all at-will employees, new or existing, who have not reached at least two years of continued employment after execution of a restrictive covenant agreement. This two-year threshold throws into question the enforceability of any restrictive covenant applicable to an at-will employee with less than two years of service whose agreement is governed by Illinois law.

Illinois Supreme Court Lets Controversial Non-Competition Case Stand October 14, 2013

In July 2013, we reported on the First District Appellate Court’s ruling in Fifield et al. v. Premier Dealer Services, Inc., in which the court upended Illinois law regarding what consideration is needed to create an enforceable post-employment non-compete agreement. Before Fifield, the conventional wisdom in Illinois was that, at least at the outset of employment, an employer need not offer an employee any additional consideration beyond at-will employment in exchange for a non-compete agreement. In Fifield, the Appellate Court rejected that reasoning, holding that at-will employment is valid consideration for a non-compete agreement only if the employee is actually employed for at least two years after signing the agreement. Under Fifield, if at-will employment is the only consideration offered in exchange for a non-compete agreement, the agreement will be rendered void if the employee’s employment ends for any reason before the two-year mark. (A full summary of the decision is available in our July 2013 alert.)

Noncompete News: Illinois Appellate Court Finds Restrictive Covenant Unenforceable; Continued Employment of at Least Two Years Required

In a decision handed down June 24, 2013, the Illinois Appellate Court, First District, found a restrictive covenant unenforceable due to lack of adequate consideration. Although this is not the first time an Illinois court has held that there must be at least two years of continued employment to constitute adequate consideration to support a restrictive covenant, the ruling in this case was remarkable because:

Illinois Appellate Court Case May Change Landscape on Consideration Necessary to Support Restrictive Covenants Signed by At-Will Employees

The Illinois Appellate Court for the First District has ruled that the commencement of at-will employment is not adequate consideration to support the enforcement of post employment restrictive covenants.

A Sea Change—Illinois Appellate Court Issues Key Ruling on Restrictive Covenant Agreements

The Illinois Appellate Court’s recent opinion in Fifield v. Premier Dealer Services, Inc. takes an aggressive stance on continued employment as consideration to support enforcement of a non-competition or non-solicitation agreement.

Continued Employment Is Not Sufficient Consideration for Restrictive Covenants Unless the Employee Remains Employed for at Least Two Years

In Illinois, it has long been recognized that a restrictive covenant in employment is enforceable so long as the employee engages in "substantial continued employment" after the employee signs the agreement. Illinois courts typically have found sufficient consideration supporting an agreement when an employee worked for more than two years, and conversely have rejected agreements where the employee worked for the employer for just a few months. The courts, however, have not established a bright-line rule. Until now.

Illinois Supreme Court Clarifies Employer’s Burden in Enforcing Post-Employment Covenants Not-to-Compete

A decision issued last week by the Illinois Supreme Court clarified the requirements in Illinois for enforceable post-employment restrictive covenants. In Reliable Fire Equipment Co. v. Arrendondo, the Court reaffirmed the longstanding requirement that a “legitimate business interest” is, in fact, a necessary element in determining the enforceability of a post-employment covenant not-to-compete. At the same time the Court rejected the view prevailing for many years among the lower Illinois courts that the only means to establish a legitimate business interest was for an employer to demonstrate either a near-permanent customer relationship or the existence of confidential and/or trade secret information. Under the Reliable Fire decision, courts must now look to the “totality of circumstances” to determine whether a non-compete restriction is justified by a legitimate business interest and otherwise is enforceable.

Illinois Supreme Court Resolves Split in Appellate Courts and Rejects Use of Rigid Tests to Evaluate Restrictive Covenants

On December 1, 2011, the Illinois Supreme Court issued a unanimous opinion in Reliable Fire Equipment Company v. Arredondo, No. 111871, 2011 WL 6000743 (Dec. 1, 2011) holding that courts cannot use rigid, structured tests to determine whether restrictive covenants are enforceable. Specifically, the Illinois Supreme Court held that while courts must continue to evaluate whether an employer has a legitimate business interest that justifies the use of a restrictive covenant, courts should not use isolated, inflexible factors in making this assessment.

Illinois Joins the Mainstream With Respect to Non-Competes

The Illinois Supreme Court recently brought Illinois into the mainstream of non-compete agreements. Like a majority of states across the country, Illinois courts must now determine whether an employer has a legitimate business interest that warrants the imposition of a restrictive covenant, whether the covenant presents an undue burden, and whether it is contrary to the public interest. In short, Illinois courts must determine whether a restrictive covenant is reasonable under the circumstances.

Ruling Gives Companies a Little More Protection.

A landmark decision was recently issued by the Fourth District appellate court in Springfield making restrictive covenants substantially easier to enforce in central Illinois. As a result, businesses in central Illinois will have greater control over the activities of departing employees.