Burr & Forman

08.7.2013   |   Blog Articles, Non-Compete & Trade Secrets Law, Non-Solicitation Agreement

Be Wary of Illinois Choice of Law Provisions in Non-Compete Agreements

Although this blog focuses on non-compete law in the Southeastern states, we often run into Chicago-based clients whose form non-compete agreements contain provisions requiring the contracts to be construed under Illinois law, even though the employees bound by the agreements are located in the Southeast. A recent Illinois appellate decision, however, should make employers and practitioners think twice before voluntarily invoking Illinois law on non-competes. In Fifield and Enterprise Financial Group, Inc. v. Premier Dealer Services, Inc., 2013 IL App (1st) 120327, 2013 Ill. App. LEXIS 424 (June 24, 2013), the Illinois Appellate Court, First Division, held that non-solicitation and non-competition covenants were unenforceable where the employee resigned after being employed for slightly longer than three months. The Court found that the restrictive covenants in the employee’s agreement were not supported by adequate consideration, and therefore could not be enforced, because “Illinois courts have repeatedly held that there must be at least two years or more of continued employment to constitute adequate consideration in support of a restrictive covenant.” Id., at 14. It appears that the only way around this two-year requirement under Illinois law is to have separate, adequate consideration for the non-compete covenants, such as a promise of guaranteed employment for a specified term or an adequate payment solely for the covenants. In contrast, Georgia courts have long held that merely the promise of new or continued at-will employment is sufficient consideration for a non-compete agreement, with no requirement for a minimum duration of employment before the non-compete will be enforceable. See Breed v. Nat. Credit Assn., 211 Ga. 629, 631-33, 88 S.E.2d 15 (1955). BURR POINT: Employers in the Southeast should consult with an attorney well-versed in non-compete law to ensure that the choice-of-law provisions in their employment agreements are not unnecessarily reducing the chances of having the non-compete provisions enforced, especially if their agreements have Illinois law as controlling. If you would like additional information on non-compete agreements and trade secrets law, please contact one of the Burr & Forman Non-Compete & Trade Secrets team members.

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