Another Court Rejects Notion that Restrictive Covenant Agreements Must be Supported by At Least Two Years of At-Will Employment
In a recent decision addressing the enforceability of a restrictive covenant agreement under Illinois law, the court in Bankers Life and Casualty Co. v. Miller, 2015 U.S. Dist. LEXIS 14337 (N.D. Ill. 2/6/15), ruled that Illinois law did not require a minimum of two years of employment to support the employee’s restrictive covenant obligations. The court rejected the employee’s argument that the “bright-line” rule created by the Illinois Appellate Court in Fifield v. Premier Dealer Services, Inc.required at least two years of continued employment to justify enforcement of the non-competition restrictions.
The Bankers court ruled that “the competition restrictions were not invalid for lack of consideration as a matter of law on the basis that the departing employees’ tenure was less than two years[.]” Instead, the court ruled that each non-competition restriction should be assessed on a case-by-case basis. The Bankers ruling is in line with a prior Northern District of Illinois decision, Montel Aetnastak, Inc. v. Miessen, in which the court (by a different judge) ruled that 15 months of continued employment was sufficient consideration to support a non-competition restriction. In Montel, the employee voluntarily resigned his employment.
In Illinois state courts, however, employers have not had such good luck. The Illinois Appellate Court in Prairie Rheumatology Associates, S.C. v. Francis recently reiterated the two-year rule created in Fifield.
For employers, the difference in the treatment of Illinois restrictive covenant agreements emphasizes the importance of beating the employee to the courthouse. In other words, if an employee files a declaratory action in state court, the odds are that the court will follow the Fifield rule. If, on the other hand, the employer files first in federal court, the odds favor the employer.
Yet another case, Instant Technology, LLC v. Defazio, 2014 U.S. Dist. LEXIS 61232 (N.D. Ill. May 2, 2014), is pending in the Seventh Circuit Court of Appeals. We will monitor this case and follow up once a ruling is issued.