Non-Compete Agreements

November 30, 2009

Non-Compete Agreements, or Restrictive Covenants, can prevent employees who leave their job from taking a different job with a competing company, from working within a certain geographic area, or from working in a given industry.  Some employers will require their employees to sign these types of agreements to protect their investment in those employees, or to protect the employer’s relationship with their customers.  These agreements can be found in some of the forms that you fill out when you are hired, in the Company Handbook, or may be presented for signature along with a promotion.  Typically, non-compete agreements are not favored by courts, and are analyzed in a variety of ways to determine if they can be enforced.  However, a recent Fourth District Appellate Court decision could make many more of these agreements enforceable and would have extensive ramifications on those employees that have signed an agreement not to compete.

Traditionally, any non-compete agreement has been analyzed under a two tiered approach, by looking first at whether the agreement is reasonable in its terms and secondly whether it serves a “legitimate business interest”.

This last September, in Sunbelt Rentals, Inc. v Ehlers, the Fourth District held that the Illinois Supreme Court has never adopted the “legitimate business interest” prong, and therefore the Courts should only look to the terms of the agreement to determine if the agreement is reasonable and should be upheld.  In ignoring the body of case law from other Illinois Appellate Courts, the Fourth District examined the Illinois Supreme Court opinions regarding non-compete agreements and found that they have never discussed the “legitimate business interest” test.  By ignoring this test, the Appellate Court proclaimed that so long as the terms of a contract are reasonable and do not violate the law, the Courts should not interfere with two parties right to enter into such contracts.

Since the case settled shortly after the decision, it has not been appealed.  Only time will tell how it will affect other Courts in analyzing non-compete agreements and the “legitimate business test” in the future.  If you are asked to sign a non-compete agreement, or if you are an employee looking to determine if an agreement that you signed with your employer can prevent you from finding another job in your industry, contact Jensen Law Office, LLC to meet with an attorney to discuss the circumstances surrounding your non-compete agreement.

Advertisements