Some employers ask their employees to sign non-compete agreements. But are those agreements enforceable? There are many factors that Illinois courts consider when analyzing whether a non-compete agreement is enforceable, including the scope of the restriction, the length of time restriction lasts, and the geographic area that the restriction covers. Another important factor is whether the employer gave the employee adequate consideration. On June 24, 2013, the Illinois Appellate Court for the First District recently handed down a decision in Fifield and Enterprise Finance Group, Inc. v. Premier Dealer Services, Inc. which holds that a mere offer of employment is not adequate consideration for a non-compete agreement and employee must have continued employment for two years or more for a non-compete agreement to be deemed enforceable without additional consideration.
In Fifield, the employer, Premier Dealer Services, offered a job to Eric Fifield contingent on his singing a “Employee Confidentiality and Inventions Agreement” which prohibited him from soliciting business or seeking employment with Premier’s competitors for a period of two years following the end of his employment with Premier. This restriction was to be effective regardless of whether Fifield resigned or was terminated by Premier. Fifield resigned from Premier after working there for a mere three months. A short time later, he was hired by Enterprise Finance Group. Enterprise filed a lawsuit against Premier asking the court to declare that the agreement Fifield signed with Premier was invalid and unenforceable. Premier filed a counterclaim asking the court to enforce the agreement. The trial court found that the non-competition provisions of the agreement were invalid as a matter of law for lack of adequate consideration. Premier appealed, and the First District Appellate Court affirmed the trial court’s decision.
The Appellate Court explained that an offer of employment, by itself, is not adequate consideration for a non-compete agreement and an employee must have continued employment for two years or more for a restrictive covenant to be deemed enforceable without additional consideration. Fifield only worked for Premier for 3 months before he resigned and he was not given a consideration beyond the initial offer of employment.
In reality, employees often stay with a single employer for less than two years. So how does an employer make sure that its non-compete agreements are enforceable? Employers should consider offering monetary incentives, beyond the mere promise of employment and/or continued employment, to employees who sign non-compete agreements. This could be in the form of a signing bonus, or stock in the company.
The corporate business attorneys at DeBlasio Law Group advise clients on non-compete agreements. They can be reached at (630) 560-1123 or via our website at www.DGLLC.net/contact.