Non-Compete Agreements

Non-Compete Agreements

Many employees in Illinois are subject to non-compete agreements with their employers or former employers. Recently, the law in Illinois regarding when such agreements are enforceable has changed. In Illinois, the general rule regarding the enforcement of non-compete agreements has been that the employer seeking to enforce such an agreement must demonstrate a protected business interest. Over the past few years, the legal definition of a "protected business interest" has been at issue. Prior to the 2009, an employer wishing to enforce the terms of a non-compete agreement was required to demonstrate a vested business interest in the form of either the need to protect confidential information and/or near-permanent customer relationships. However, in 2009, the Illinois Appellate Court in Sunbelt Rentals, Inc. v. Ehlers, 394 Ill. App. 3d 421 (4th Dist. 2009), announced that proof of a protectable interest was no longer required in order to enforce the terms of a non-compete agreement. Rather, the agreement merely needed to be reasonable as to time and geography.

However, in December, 2011, the Illinois Supreme Court altered the non-compete landscape once again in Reliable Fire Equipment Co. v. Arredondo, No. 111871, 2011 Ill. LEXIS 1836. In Reliable, the court rejected the Sunbelt holding and reinstated the significance of establishing a legitimate business interest to enforce non-compete agreements. The Court held that a non-compete agreement is enforceable so long as it is no more restrictive than required to protect a business interest, does not impose undue hardship on the employee, and is not injurious to the public. This shift in focus is significant in that it reaffirms the importance of establishing the employer's business interests when determining whether or not a non-compete agreement can be enforced.

The court also acknowledged that a business interest can include more than just the protection of confidential information and customer relationships. Under the Supreme Court's decision inReliable, Illinois courts should examine each case individually to determine what factors could be considered important in establishing a business interest. The Reliable decision affords employers greater flexibility in establishing a protectable business interest, which in turn, may result in (a) fewer dismissals of employers' complaints to enforce non-compete agreements and (b) more employees being bound by non-compete agreements.

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