Whether a non-competition or non-solicitation agreement is valid and enforceable under Illinois law depends upon the specific terms of the agreement, as well as the unique facts and circumstances surrounding the agreement, employment, separation of employment, and post-employment employee conduct.
Adequate Consideration: The first question is whether adequate consideration exists to support a restrictive covenant. Consideration is something of value given in exchange for an agreement. Continued employment may constitute adequate consideration, but Illinois appellate courts have held that employment for fewer than two years is insufficient. Federal courts are not required to follow the “two-year rule.” Other types of consideration do not depend on the length of employment, such as special bonuses, payments, or employee benefits to which an employee would otherwise not be entitled.
Three-Prong Test: Illinois courts apply a three-prong test to determine whether a non-competition or non-solicitation agreement is enforceable. A restrictive covenant, assuming it is ancillary to a valid employment relationship, is reasonable and enforceable only if the covenant:
- is necessary, but no greater than required, for the protection of a legitimate business interest of an employer;
- does not impose an undue hardship on the employee; and
- does not injure the public.
Protectable Business Interests: These include, but are not limited to, customer relationships, confidential information, and trade secrets. Courts consider a variety of factors, such as the near-permanence of customer relationships, whether the employee acquired confidential information through his or her employment, as well as time and place restrictions. No single factor is determinative or carries more weight than another. Whether a legitimate business interest exists is based on the totality of the facts and circumstances of each individual case.
Reasonableness of Time, Place, and Activity Restrictions: In addition, to be enforceable, a restrictive covenant must be reasonable in temporal, geographic, and type of activity scope. There are no bright-line rules to determine reasonableness. Whether a restrictive covenant is reasonable in scope depends on the extent of the restrictions as well as the surrounding circumstances.