Illinois Appellate Court carves into restrictive covenants.
The Illinois Appellate Court issued an opinion last week that dramatically impacted an employer’s ability to keep former employees from going to work for competitors, or even potentially disseminating corporate information. In Premier v. Fifield, Eric Fifield was in employment negotiations with Premier Dealer Services[“Premier], a developer and marketer of various vehicle after-market products and programs. As part of his employment, Fifield was required to sign an Employee Confidentiality and Inventions Agreement[“the agreement”] which included language that Fifeld was barred from soliciting Premier clients for two years after a separation from Premier. Fifield accepted the job and signed the Agreement in October, 2009. Not quite 4 months later, Fifield wanted out and informed Premier he was resigning. He did so two weeks later.
Fifield and his new employer filed a complaint for declaratory judgment, seeking a ruling that portions of the agreement were not enforceable. Premier filed a counterclaim seeking an order where the agreement would be enforced and Fifield barred from disseminating any Premier corporate information. The trial court ruled that the Agreement was unenforceable. Premier then appealed.
The Appellate Court first noted that restrictive covenants[the fancy legal term to describe the agreement Premier was trying enforce], were actually restraints of trade – and, as a result, would be examined closely. In order to be enforceable, the agreement must be reasonable. And one of the key actors in determining the reasonableness was whether the agreement was supported by adequate consideration – in other words, both parties got something out of the deal. Premier argued that Fifield did get something for signing the agreement – namely a job. But the Appellate Court said not so fast. Generally, Illinois Courts require the for employment to be considered appropriate consideration, the employee must be employed for at least two years. The Appellate Court noted that Fifield’s four month employment fell far short of the required two year period. The Appellate Court upheld the lower court’s decision.
The attached Crain’s Chicago Business article by Paul Merrion details how Illinois employers are more than a little ruffled by the decision and scrambling for ways to protect their interests.