January 2012

By: Nancy E. Joerg, Esq.

The legal landscape in Illinois has been shaken up with regard to non-compete agreements. This is because of a surprise “pro-employer” decision that was issued by the Illinois Supreme Court on December 1, 2011. In this historic decision ( Reliable Fire Equip. Co. v. Arredondo , 2011 IL 111871), the Illinois Supreme Court clarified and broadened the circumstances in which non-compete agreements will be considered enforceable in Illinois. Illinois companies using non-compete agreements as protection should take careful note!

I have recently written articles about this dramatic new Illinois Supreme Court decision, and as a result, I have received many questions from employers and other members of management about the status of non-compete agreements in Illinois.

In this article, I am going to answer the ten most common questions I have received recently about non-compete agreements in Illinois:

1. Question: As a result of the Reliable decision, is it now easier or harder for an employer to go into court and enforce a non-compete agreement?

Answer: It is now easier.

2. Question: How would you describe the new test?

Answer: It can be thought of as a balancing test or a totality of the circumstances.

3. Question: Does an employer still need to have “adequate legal consideration” in a non-compete agreement?

Answer: Yes

4. Question: Is the enforceability of each non-compete agreement determined on the particular facts of a particular situation?

Answer: Yes. In fact, the same non-compete agreement may be considered reasonable by a court under one set of circumstances and unreasonable under another set of circumstances.

5. Question: Is the “near permanence of customer relationships” still a factor that courts will consider in enforcing a non-compete agreement?

Answer: Yes

6. Question: Will courts still look at the duration or length of the restriction in the non-compete agreement?

Answer: Yes. It is still wise to have the restriction period no more than two years after the date of termination; the longer the restriction in the non-compete agreement, the less likely a court will find it reasonable.

7. Question: Does one certain factor carry more weight than the others under this new totality of the circumstances balancing test?

Answer: No

8. Question: Can an employer restrict an employee from competing in an area as big as the entire State of Illinois or even the entire United States?

Answer: Usually no. Courts like to see the geographical area in a non-compete agreement be as narrowly drawn and small as possible and reasonable under the circumstances. The bigger the geographic area that you have in your non-compete agreement, the less likely that agreement will be enforceable.

9. Question: Under the Reliable decision, will Illinois courts still look at whether a non-compete agreement imposes an “undue hardship on the employee”?

Answer: Yes.

10. Question: Under the Reliable decision, will Illinois courts look at whether the non-compete agreement appears to be injurious to the public?

Answer: Yes

Illinois employers should carefully re-evaluate and review their non-compete agreements in light of this important new Illinois Supreme Court decision. Sometimes with a slight modification, unenforceable non-compete agreements can become enforceable. Are the duration, length and scope of your company’s restrictions “reasonable”? It is definitely worthwhile to have an experienced employment lawyer review your non-compete agreement to see if it can be strengthened. If you would like your non-compete agreement reviewed and want to work on strengthening the enforceability of the decision, contact Attorney Nancy E. Joerg of Wessels Sherman’s St. Charles, Illinois office at 630-377-1554 or via email at najoerg@wesselssherman.com. Protect your business ; establish strong and enforceable non-compete agreements.

Questions? Please contact Nancy E. Joerg a Wessels Sherman Shareholder and Senior Attorney at (630) 377-1554 or najoerg@wesselssherman.com.