Non-Competition Agreement

A non-competition agreement is a written contract between an employer and an employee. In such a contract, the employer agrees to give the employee a job or something else of value in exchange for the employee’s signed promise to not work for employer’s competitors or work in the same industry as the employer when the employee’s job ends.

Litigation oftentimes ensues when an employer discovers that a former employee who signed a non-compete agreement is working for the employer’s competitor or engaged in their own business in competition with the employer. The employee usually will argue that the non-compete agreement is not enforceable because it is an unreasonable restraint of trade and violates public policy. The employer will argue to the contrary and claim that the employee learned proprietary information during his employment and is using that information to his or her own benefit.

Illinois Litigation: Non-Competition Agreements Law

In Illinois, a non-competition agreement that prohibits a person from ever working in a certain occupation or industry is void because it deprives that person from pursuing an occupation and thereby supporting his or her family. However, a reasonable non-compete agreement is enforceable.

There is a three-dimensional test to determine whether a non-competition agreement is reasonable:

1. The contract should not be broader than necessary to protect the legitimate business interests of the employer.

2. The contract must not be so unfair that the employee cannot pursue his or her occupation.

3. The contract does not harm the public at large in some way.

This three-pronged test is flexible. There is no particular set of factors that must be used to determine the first prong or what qualifies as a “legitimate business interest.” Instead, what amounts to a “legitimate business interest” depends on all of the circumstances.

Under some circumstances, a non-compete agreement may be a reasonable means to protect a legitimate business interest of the employer. A non-compete agreement is usually justified in restraining the employee from appropriating the employer’s proprietary information and deserves enforcement if:

  • The employee learned confidential information by virtue of his employment and subsequently tried to use it for his or her own benefit.
  • The employee gained access to the employer’s list of near-permanent customers. Such lists are considered proprietary if the employee never would have had access to them if he or she had never been associated with the employer.

On the other hand, the employer has no proprietary interest in customer lists when they are not secret or when the customer relationships are short-term and no special knowledge or trade secrets are involved.

In addition to protecting a legitimate business interest of the employer, the non-competition agreement must be reasonably limited in time and geographical territory such that no undue hardship is placed on the employee in finding employment and supporting his or her family. Moreover, the agreement cannot have an adverse affect on the public at large.

An Illinois court will determine each case based on its particular set of facts. Reasonableness and enforceability is gauged by all of the circumstances. The same identical non-compete agreement could be reasonable and enforceable under one set of circumstances and unreasonable and void under another set of circumstances. Employees who have questions about non-compete agreements should seek the guidance of an experienced Chicago attorney.