The Limited Power of Non-Compete Clauses

The Limited Power of Non-Compete Clauses

Business meetingA number of recent cases in Illinois have brought into question the limits of non-compete clauses in employment contracts. Some of these seem to severely limit the application of these clauses. Others have favored the employer’s rights, but one thing is clear: businesses that ignore the impact of these developments put their interests at risk.

The debate over non-compete clauses reached its peak in 2013. In the Fifield case the Illinois First District appeals court upheld a decision that sets a relatively strict standard for the length of time an employee can be under continuous contract and avoid the terms of the non-compete clause signed when they agreed to the terms of employment. The general standard now sits at two years of employment before an employee is considered fully bound by the non-compete clause. In the Fifield case the employee had only been employed for a period of three months before resigning. His former employer tried to enforce its non-compete clause. In the end, their claims were baseless.

Since 2013, a number of other cases have built upon and responded to the fallout from the Fifield case. In short, many businesses need to confer with their business lawyer more in depth. This is due to the restrictions now clearly placed upon businesses and the reach of their non-compete clauses. Clauses that try to extend restrictions too far may end up entirely backfiring for their business. For example, if a business attempts to restrict former employers from seeking employment within their industry on a nationwide scale, this could qualify as overly broad. The business may very well make their entire non-compete clause invalid if they try to reach this far.

At the same time, employees do not have a cut and dry two year rule to count on. A 2015 ruling also from the First District Appeals Court stated that employers can set other fair conditions that restrict former employees from working with a competitor. These need to be clearly stated and agreed to though. If not very clearly known, the two-year standard of employment makes it ever more challenging to enforce harsher non-compete clauses.

A business lawyer with the knowledge to properly document and interpret the law is more important than ever. Trade secrets, competitiveness, and overall business welfare now depend upon successfully writing and enforcing non-compete clauses.

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