Courts Take Closer Look at Noncompete Clauses

Workforce Magazine

Peter A. Steinmeyer, a Member of the Firm in the Employment, Labor & Workforce Management practice, in the firm’s Chicago office, and Scarlett L. Freeman, an Associate in the Litigation practice, in the firm’s New York office, authored an article in Workforce Magazine titled “Courts Take Closer Look at Noncompete Clauses.”

Following is an excerpt:

In the past few years, courts have been re-examining what constitutes adequate consideration for a restrictive covenant. In 2013, the Illinois Court of Appeals held, contrary to longstanding precedent, that in the absence of other considerations, mere employment constitutes adequate consideration for a restrictive covenant only if the employee remains employed for at least two years after signing the restrictive covenant.

This two-year rule applies regardless of whether the employee signed the restrictive covenant as a new or existing employee and regardless of whether the employee voluntarily resigned or was fired. Notably, multiple federal district courts in Illinois subsequently declined to apply the bright-line rule, instead considering other factors such as compensation, raises and bonuses, and the terms of the employee’s termination.