Are Non-Compete Agreements Legal and Valid in Illinois?

IL Business Lawyer, Illinois employment attorneyIf you are on the job hunt or have recently been hired by a new company, it is important that you review the contract given to you by your new employer. Many new hires will sign employment contracts relieved to have found a job rather than skeptical about the contract’s details. No matter how much your employer appears to explain the contract in front of you, there is always the chance that some details are being left out. One of the terms that you may overlook is a non-compete agreement hidden within the pages of text. Many employers will be upfront about this agreement to avoid any future contention while others may fail to mention what this means for you as an employee of their company. In order to avoid this confusion, you should always take the time to review your hiring contract with a reputable business attorney.

What is a Non-Compete Agreement?

Evident in the name, this contractual agreement restricts employees from working for or becoming a competitor for a set period of time. These non-compete agreements, also known as covenants not to compete (CNC), are enforced when an employee separates from their employer and the employer wants to prevent the employee from taking on a position that would be considered their competitor. Depending on the details of the agreement, these CNC regulations can last weeks, months, or even years after leaving your place of employment. This is meant to protect the company’s secrets and to keep the employee from poaching other employees to work alongside them.

In order for the non-compete agreement to be considered valid, there is particular information that must be included:

  1. The effective start date of the agreement.
  2. The reasoning for the purpose of the agreement.
  3. Specified dates in which the employee will be unable to work in a competitive sense and geographical location outlined in the agreement.
  4. Information on how the employee will be compensated for agreeing to these terms.

How Broad Can These Go?

For obvious reasons, CNC agreements must have specifications for what is considered “competition.” If these descriptions are too broad, the non-compete agreement may be deemed invalid in a court of law. In 2018, the Illinois court saw a lawsuit in which the employee claimed that the agreement was too broad to be considered valid and enforceable. The agreement in question prohibited the employee from being employed to any extent by any company that works in the same business as the employer within 50 miles of the company’s office. This included taking a position that had no relevance to their previous position, such as janitorial work. Looking at this agreement, the terms deny the individual’s ability to hold a job within a reasonable distance of their home. For this reason, the court sided with the employee stating that the agreement was much too broad to be considered valid. This is one instance in which the court took the employee’s side; however, more often than not, the employer is granted their wishes.

Call a DuPage County Covenants Not to Compete Lawyer

No one intends on having the same job forever, but some may feel as if they must stay in their position due to the details of their contract. It is not unheard of for CNC agreements to act as a tool to keep employees in their position by restricting their ability to find another job. If you feel as if your contract is unreasonable, you should have a Wheaton non-compete agreement attorney read the terms and conditions of the CNC. If the conditions are too broad or restrictive, you may be able to have the agreement thrown out by a court of law. The legal team at Stock, Carlson, Oldfield & McGrath, LLC, has worked with employers and employees to make sure their contractual non-compete agreements are valid and enforceable in Illinois. For legal help, contact us at 630-665-2500 to schedule your initial consultation.

 

Sources:

https://www.thebalancecareers.com/what-is-a-non-compete-agreement-2062045

https://www.americanbar.org/groups/litigation/committees/business-torts-unfair-competition/practice/2018/overreaching-covenants-not-to-compete/

https://www.investopedia.com/terms/n/noncompete-agreement.asp

 

How a Non-Compete Agreement Can Benefit Your Business

non-compete, Wheaton business lawyersWhen an individual purchases a business, they are not only buying the physical assets associated with that business. They are also taking ownership of more abstract assets like the existing customer base, the name and reputation of the business, and intellectual property. Understandably, someone who buys a business wants to ensure that the value of these intangible assets is not reduced because the original owner of the business is opening a competing business in the same market. This is just one of many situations in which a non-compete agreement can be beneficial.

How Does a Non-Compete Agreement Work?

Put simply, a non-compete agreement is a legally binding contract involving a promise not to enter into business competition of some kind. Non-competition clauses are most often used to prevent an employee from working for a competitor or starting a business that competes with his or her employer’s business. These agreements can also include a provision prohibiting the employee from disclosing proprietary information to other parties. Covenants not to compete are often also required of business consultants and contractors.

Non-Compete Agreements Must Meet Certain Criteria to be Enforceable

Of course, a non-competition agreement cannot simply instruct an employee to never again work in a certain field. The scope and duration of a non-compete must be reasonable for the contract to be valid. Illinois courts have ruled that non-compete agreements are only valid if certain criteria is met. It is advised that any business utilizing a non-compete in Illinois provides employees with continuous employment for at least two years as well as additional consideration in the form of perks like bonuses or higher compensation.

If a non-compete agreement does not meet the criteria required by Illinois law, the agreement may be completely unenforceable. There can be unexpected and serious repercussions when a non-compete agreement is not legally binding. The best way to ensure that you employee contracts are valid, reasonable, and effective is to have these contracts reviewed by a qualified business law attorney.

Contact a DuPage County Business Agreement Attorney

If you are a current business owner, plan to buy a business, or have business law-related needs, the skilled Wheaton business law attorney at Stock, Carlson & Duff LLC. We have provided the DuPage County community and surrounding areas with knowledgeable business law counsel since 1996, and we have the experience and education required to assist you with a wide range of business concerns. Call us at 630-665-2500 to schedule a personalized consultation.

Sources:

https://www.investopedia.com/terms/n/noncompete-agreement.asp

https://www.forbes.com/sites/adrianagardella/2015/07/25/the-limits-of-non-compete-agreements/

Can I Require My Employees to Sign Non-Compete Agreements?

non-compete, DuPage County contract lawyersIn today’s highly competitive world, many employers insist that their employees sign non-compete agreements or NCAs. Also called non-competition agreements, these documents are especially popular for employers who hire workers with unique abilities or specific talents. In general, employers have the right to attempt to limit the impact to their brand caused by an employee leaving, but a non-compete agreement could be declared unenforceable if an employer overreaches. Put simply, NCAs can help protect your company, but they must be used properly.

The Basics of Contract Law

If you intend to have your employees sign an NCA, you probably expect the document to be a valid contract. This means that the NCA must meet the requirements of any other contract. Under Illinois law, these requirements are an offer, acceptance, and consideration for both parties. Basically, both sides must reach an agreement to exchange something for another thing—in most cases, the trade is a form of payment in exchange for goods or services. “Consideration” refers to what each party receives. For example, a purchase at a grocery store is essentially a simple contract. The store offer eggs for sale at a specific price—the “terms” of the contract. By handing over your money, you accept those terms. The store receives your money as the consideration, and you receive the eggs as your consideration.

In the past, the consideration offered in exchange for signing a non-compete agreement was the continuation of employment. Essentially, “sign this and you will be allowed to work here.” Unfortunately, this led to employers hiring certain employees for a very short period of time, requiring them to sign NCAs, then terminating them, leaving them without the ability to find work in their field. In 2013, Illinois courts determined that such practices were unethical, and two years of continued employment was found to be sufficient consideration.

Other Important Factors

Under Illinois law, there are generally four factors that will determine the viability of your NCA. If any of the four is found to be lacking, the entire agreement may be set aside:

  • Scope: The scope of your NCA is important, especially if your business operates in a narrow field. It is reasonable to require NCAs for employees with uncommon or unique training. However, it is unreasonable to ask minimum-wage cashiers or laborers to sign NCAs to stop them from doing similar work at another company.
  • Legitimate business interests: It is not enough to want an NCA; you must have something to protect. In many cases, this “something” might be proprietary interests, processes, or information that could damage your company if it was given to a competitor.
  • Area: The geographic factor of an NCA is becoming more complex in the digital age, but your NCA still cannot be overly restrictive. For example, it is understandable that your NCA might prevent an employee from working for a competitor in DuPage County, but trying to restrict competition in the entire state of Illinois is less understandable.
  • Duration: The average NCA is set up to last for two years or less. Drafting an agreement that lasts longer will increase the chances of it being deemed invalid on the basis of unconscionability.

If an NCA is overbroad on any of these factors, it could be considered “restraint of trade.” This will nearly always result in the agreement being unenforceable. So, the answer to the question is “Yes.” You can require certain employees to sign a non-compete agreement, but it will only be enforceable if the terms are reasonable.

A Wheaton Contract Attorney Can Help

For more information about non-compete agreements or any other business contracts in Illinois, contact a DuPage County business lawyer. Call 630-665-2500 to schedule a confidential consultation at Stock, Carlson & Duff LLC today. We will work with you in developing legally sound, enforceable business agreements that are designed to protect you and your company.

Sources:

http://www.businessdictionary.com/definition/restraint-of-trade.html

http://www.illinoiscourts.gov/circuitcourt/civiljuryinstructions/700.00.pdf