Non-Compete Covenants

Get Some Help

from Illinois Supreme Court

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Court Requires Proof of

Legitimate Interest

But Proof Easier at

TRO Stage

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Resolves Split in District

Appellate Courts But No

Clarification of “Reasonable”

             In Reliable Fire Equipment Co. v. Arrendondo et al, __Ill 2nd__ (December 1, 2011), the state supreme court told employers that they must prove a legitimate business interest (along with other facts) to make a covenant not to compete stick.  But the court also ruled that the trial courts should consider a totality of the circumstances in passing on the merits of the protectible interest claim.  The court listed the well-known factors for consideration, but held that no one factor was to be given more weight than the others:  a) the near permanence of customer relations,  b) the employee’s acquisition of confidential information while employed, and  c) time and place limitations.

             The court adopted a three part test for the lower courts to apply when considering the enforceability of a covenant:  1) whether the restraint is necessary to protect a legitimate business interest of the employer,  2) whether the restraint imposes a hardship on the employee or the public,  and 3) whether the extent or scope of the restraint is otherwise reasonable.

             Observers believe that Reliable may restrain the chancery judge from striking down or paring down covenants in motion to dismiss proceedings, a development that would be beneficial to the former employer seeking to enjoin the competition. 

             Meanwhile the Illinois legislature has not acted on the bill to codify the ingredients required for an enforceable covenant.

 

 

12/21/2011