If you are a business owner and you are considering utilizing a non-compete agreement, it is important to understand the implications of the agreement. Employment law agreements to not compete often involve a specified duration of time, a specified geographic area, or combination of the two which limits your employee’s ability to work in the same industry in which your business operates. Courts look to the interests of the employer, employee and the public in assessing the validity of non-compete agreements. In Illinois, the enforceability of non-compete agreements depends on the reasonableness of the agreement.
Reasonableness is often in the eye of the beholder, but thankfully the Illinois courts have delineated some generalizations as to determining the reasonableness of a non-compete agreement. As it is with so much of the law, reasonableness as it pertains to non-compete agreements is determined on a case-by-case basis by examining the totality of the circumstances underlying the agreement. A non-compete agreement may be seen as reasonable and valid under one set of circumstances but unreasonable and invalid under another set of circumstance.
For example, in Reliable Fire Equipment Company v. Arredondo, 965 N.E.2d 393 (Ill. 2011), the Illinois Supreme Court cited numerous cases espousing the principal that Illinois courts will examine the non-compete agreements to consider whether it is reasonable only if the covenant: (1) is no greater than is required for the protection of a legitimate business interest of the employer-promisee; (2) does not impose undue hardship on the employee-promisor, and (3) is not injurious to the public.
The court further reasoned that within that three-pronged test, the factors such as time and geographic area are merely non-conclusive aids in ascertaining whether the restrictive covenant (i.e. non-compete agreement) relates to the employer’s legitimate business interest. Finally the court recognized that additional factors to be considered, all of which are equal when being considered, are, “the near-permanence of customer relationships, the employee’s acquisition of confidential information through his employment, and time and place restrictions.”
Remember, if you, on behalf of your business, are considering utilizing non-compete agreements or your business currently has employees under non-compete agreements and you are concerned about your options if your employees quits or are terminated, you should contact a licensed attorney specializing in employment law. If your company operates in multiple states and one or some of your employees executed non-compete agreements outside the state of Illinois,an experienced employment defense attorney in Schaumburg can assist you as they will be able to research the particular state’s laws under which the agreement was executed and offer the best alternatives going forward. It is important to remember that while these agreements are designed to protect the employer, often they can be drafted incorrectly and be overly burdensome in their protections. For the protection of your business, be certain that you seek an employment law attorney before attempting to draft a non-compete agreement.