A Recent Illinois Supreme Court Decision Should Make It Easier To Enforce Non-Competition Agreements

Arnstein & Lehr attorney Thadford A. Felton

Thadford A. Felton

On December 1, 2011, the Illinois Supreme Court issued an opinion in Reliable Fire Equipment Company v. Arnold Arrendondo, et al. that set forth the factors that the Illinois courts should look to in evaluating the reasonableness of non-competition agreements. The Court reaffirmed that a non-competition agreement is reasonable only if the following the following four conditions are met:

  • The covenant is ancillary to a valid employment relationship;
  • The covenant is no greater than is required for the protection of a legitimate business interest of the employer;
  • The covenant does not impose undue hardship on the employee; and
  • The covenant is not injurious to the public.

In addition, the Court clarified what factors a court should consider in evaluating the “legitimate business interest” of the employer. The court stated that “whether a legitimate business interest exists is based on the totality of the facts and circumstances of the individual case. Factors to be considered in this analysis include, but are not limited to, the near-permanence of customer relationships, the employee’s acquisition of confidential information through his employment, and time and place restrictions.” The Court went on to say that no one factor should be weighted more than any of the other factors as the importance and weight to be given to certain factors will depend on the specific facts and circumstances of the individual case. As a result, “the same identical contract and restraint may be reasonable and valid under one set of circumstances, and unreasonable and invalid under another set of circumstances.”

From a business perspective, the importance of this case is that it should be easier for businesses to enforce non-competition agreements against former employees as a court must now consider a variety of factors in determining the employer’s legitimate business interest. This will give an employer more flexibility in arguing what is its legitimate business interest that needs protection.

Please click here if you would like to view the whole opinion.

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