Confusion Still Exists Over Non-Compete Provisions
By: Wasif A. Khan, Esq.
As a healthcare attorney, I routinely counsel clients on the applicability of restrictive covenants, especially noncompete provisions. Generally, states, including Illinois tend to apply a “reasonableness” standard, meaning courts will look at the facts and circumstances surrounding the employment, the actual terms of the noncompete, and other relevant factors to determine whether the noncompete provision is in fact reasonable.
However, in light of a recent decision by the Illinois First District Appellate Court, Fifield v. Premier Dealer Services, Inc., Illinois employers should review the noncompete provisions in employment agreements to determine whether or not they are supported by appropriate consideration that extends beyond merely continuing an employee’s employment. While courts have not clarified what exactly qualifies as “sufficient consideration”, what is clear is that in the First District of Illinois (Cook County) state courts will not enforce noncompetes unless (i) the employee worked for the employer for at least a period of two years or (ii) the employer offered some other consideration that is tied specifically to the non-compete.
Previously, Illinois employers could argue that employment for a certain “substantial” period of time was adequate consideration to support a noncompete provision. In Fifield, however, the 1st District Appellate Court held that two years of employment constitutes adequate consideration to enforce a non-compete; it does not matter if the employee signed the noncompete as a condition of employment or if the employee leaves voluntarily. Employment for a period less than two years is not adequate, unless some other valuable consideration was provided to the employee. While, the 1st District Appellate Court’s decision in Fifield is inconsistent with decisions by the other Illinois appellate courts regarding what constitutes sufficient consideration, it does set new precedence in Cook County. Illinois employers still do not have clear guidance on what consideration must be offered to employees to ensure enforceability of noncompete provisions.
Questions still remain about Fifield and its ability to survive as a long-standing precedence in Illinois. Specifically, Fifield applied to “at-will” employees. Physicians tend not to be “at-will” employees because they sign an actual employment agreement with notice periods prior to termination; it remains to be seen if and how this distinction may impact future litigation.
Because there is no clear guidance from the Illinois Supreme Court on what constitutes adequate consideration for a non-compete, employers should consult legal counsel to draft strong(er) non-compete provisions.