Client Alert - Employment Law Update
Illinois Appellate Court Refuses to Extend Period of Non-Compete Agreement
In a recent decision, an Illinois Appellate Court refused to extend the period of a non-compete agreement after it was breached by former employees. The decision illustrates the importance of properly drafting these key agreements.
The case of Citadel Investment Group, LLC v. Teza Technologies, LLC, No. 1-09-2828 (February 24, 2010) began when former employees of Citadel left to start a competing business. Mikhail Malyshev and Jace Kohlmeier resigned from Citadel in February of 2009. Because of their important roles in the organization, they had each previously signed non-compete agreements, which prohibited them from working for competitors of Citadel for a nine-month period. In accordance with the agreements, they also received monthly payments of $30,000 and $21,000, respectively. Nevertheless, in March of 2009, they formed an entity that would later become Teza, and began operations. Citadel learned of these actions in July of 2009, and filed suit.
In October of 2009, following an evidentiary hearing, the trial court determined that the non-compete agreements were enforceable and that Malyshev and Kohlmeier had violated the agreements. It entered an injunction, prohibiting them from working for Teza, or any other competitor of Citadel. However, it limited the term of the injunction to the nine-month period set out in the non-competes. As a result, the injunction expired a mere one month later.
Citadel appealed the decision, arguing that the injunction should run for a full nine months from the date it was entered. In affirming the trial court's ruling, Illinois' Appellate Court for the First District emphasized that the non-compete agreements did not include provisions, allowing their lengths to be extended during any period of violation. Due to this simple shortcoming, Citadel's argument was rejected.
What to Do
Non-compete agreements are important tools in protecting business assets. However, without properly drafted agreements, employers risk losing the benefits they intend to secure. Because these agreements constitute restraints on trade, they are strictly construed by courts. This means that even the slightest defect can prove fatal in litigation.
If you would like more information about this decision, or have questions about your employment agreements or practices in general, please contact Mr. Gonzalez at 312-558-9779 or at egonzalez@elvisgonzalezltd.com.
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