Client Alert - Employment Law Update
Federal Court Rejects Bright Line Standard for Enforcing Non-Competes
The U.S. District Court for the Northern District of Illinois recently decided a case that continues to muddy the waters on an important legal issue facing employers.
The case of Bankers Life & Casualty v. Miller, No. 14-CV-3165 (February 6, 2015) began when a number of insurance agents and managers went to work for a competitor, allegedly downloaded confidential information that included client lists, and began soliciting former customers. Bankers Life filed suit in federal court to enforce non-disclosure and non-solicitation agreements, which the former employees had signed.
As discussed in an earlier Client Alert, an Illinois appellate court that covers Chicago and Cook County had previously issued a significant ruling in the case of Fifield v. Premier Dealers Servs. It decided that where no other benefit was provided in exchange for a non-compete, it would not be enforced unless an individual had been employed for a minimum of two years after agreeing to it. However, the federal court rejected a rigid application of that standard. Instead, it looked to a prior Illinois Supreme Court decision that endorsed a rule "grounded in the totality of the circumstances, under which each case must be determined on its own particular facts." Because other appellate courts had also recently considered additional factors besides the length of employment in evaluating restrictive covenants, the court concluded that the Illinois Supreme Court would not likely adopt the bright line 2-year requirement.
While favorable to employers, the reach of the Bankers Life case is somewhat limited as it only applies in federal court. Because not every case can be filed in federal court, not all employers will be able to take advantage of the decision. Nonetheless, it is an important case because it is now the third in the last year to reach completely different results when interpreting the Fifield standard for enforcing restrictive covenants.
What to do
Until the Illinois Supreme Court brings clarity, various strategic and legal considerations will abound when an employer is faced with the need to protect its business assets through restrictive covenants. These include determining what consideration is adequate when entering into restrictive covenants, and whether there is a basis for federal jurisdiction when seeking to enforce them in court.
If you would like more information about this decision, or have questions about your employment policies and practices in general, please contact Mr. Gonzalez at 312-558-9779 or at egonzalez@elvisgonzalezltd.com.
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