Illinois Appellate Court

$2.4 Million Jury Verdict on Breach of Employment Contract and Tortious Interference Claims

On March 28, 2016, the Illinois Appellate Court, First District, affirmed a $2.4 Million jury verdict in a lawsuit for breach of an employment agreement and tortious interference with the employment contract.  Koehler v. The Packer Group, et al., 2016 IL App (1st) 142767 (3/28/2016).  The plaintiff, who was employed as a CEO, alleged that he was demoted and then discharged after revealing financial improprieties to the company's board.  He sued the company for breach of his employment contract and also sued certain individuals for tortious interference with contract, claiming that they induced the company to breach its employment agreement with him.  After a three-week trial, the jury returned a large verdict for the plaintiff.

3.3 Million Dollar Jury Verdict in Wrongful Termination Case

On March 2, 2016, the Illinois Appellate Court, First District, affirmed a substantial jury verdict in an Illinois wrongful termination lawsuit in which the plaintiff alleged that his employment was terminated in retaliation for contacting the Illinois Attorney General's office and reporting information that he believed was a legal violation as well as for providing responses to a Freedom of Information Act request.  Crowley v. Watson, et al., 2016 IL App (1st) 142847 (3/2/2016).  The plaintiff is an attorney who worked for Chicago State University.  His wrongful discharge lawsuit was based on the Whistle Blower Protection section of the Illinois Ethics Act, which prohibits retaliatory action against a state employee for his or her protected activity, including the disclosure of legal violations to a public body.  The First District noted that the claim is analogous to the Illinois common law tort of retaliatory discharge, which is an exception to the general rule of employment at-will in Illinois.  Under Illinois law, there is a cause of action for retaliatory discharge where an employee is discharged in retaliation for engaging in protected activities, in violation of a clear public policy mandate.

Employer Customer Lists May Qualify As Trade Secrets

On February 17, 2016, the Illinois Appellate Court, First District, issued an opinion in a lawsuit in which an employer sued a former employee for breach and enforcement of his employment agreement and his severance agreement.  Bridgeview Bank Group v. Meyer, 2016 IL App 160042 (1st Dist., 2/17/2016).  The employee had entered into an employment contract which contained, among other things, a non-competition provision, as well as a confidentiality clause and non-solicitation provisions as to customers and employees.  In connection with the termination of his employment, the employee signed a severance agreement, which eliminated the non-competition provision of his employment agreement, but re-affirmed the confidentiality and non-solicitation provisions.  The employer filed a lawsuit against the former employee, in which it alleged that he violated the provisions of the employment agreement and the severance agreement.  The employer asserted claims under Illinois law for breach of contract, breach of fiduciary duty, tortious interference with business relationships, and violation of the Illinois Trade Secrets Act.

Federal and Illinois Courts Disagree About What Makes Non-Compete Clauses in Employment Contracts Enforceable

There is a judicial split between federal judges in the Northern District of Illinois and the Illinois Appellate Court, First District, on the issue of whether two years of continued employment is required for adequate consideration to support a non-competition provision in an employment contract under Illinois law.  In 2013, the Illinois Appellate Court, First District, held that (absent other consideration) at least two years of employment is required as consideration to support a non-compete or non-solicitation clause in an employment agreement.  Fifield v. Premier Dealer Servs., Inc., 373 Ill.Dec. 379, 993 N.E.2d 938 (Ill.App.1st Dist. 2013).  Otherwise, the non-compete or non-solicitation provision is unenforceable for lack of consideration, even if the employee left employment voluntarily.

Illinois Appellate Court Slams Restrictive Covenants

On October 26, 2015, the Illinois Appellate Court held that non-competition, non-solicitation, and confidentiality provisions contained in an employment contract were unenforceable as a matter of law.  Assured Partners, Inc., et al. v. Schmitt, 2015 IL App (1st) 141863.  This case involved a "take it or leave it" employment agreement that an employer required an employee to sign during his employment in order to keep his job.  The agreement contained the usual restrictive covenants.  After the employee resigned, the employer filed a lawsuit to enforce the restrictive covenants against him.  A non-competition agreement is enforceable only if it: (1) is no greater than is required to protect a legitimate business interest of the employer; (2) does not impose an undue hardship on the employee; and (3) is not injurious to the public.  In addition, the scope of the activity, temporal, and geographic restrictions must be reasonable.  The court found the non-competition provision unreasonably broad in terms of activity, temporal, and geographic scope.  The non-compete prohibited the employee, an professional liability insurance broker, from working in that industry for 28 months in all 50 states.

Illinois Appellate Court Follows Fifield, Declares Noncompetition Agreement Unenforceable for Lack of Consideration

On June 25, 2015, the Illinois Appellate Court, First District, held that a noncompetition provision in an employment contract is unenforceable for lack of consideration when the duration of the employee's employment is less than two years and there is no other consideration.  McInnis v. OAG Motorcycle Ventures, Inc., 2015 IL App (1st) 130097 (June 25, 2015).  A motorcycle salesman who resigned after 18 months filed a declaratory judgment action seeking to declare restrictive covenants in his employment contract unenforceable.  The employer filed a counterclaim to enforce the restrictive covenants. The trial court ruled in favor of the former employee; and the employer appealed.  The First District affirmed the ruling of the trial court and, in so doing, upheld and clarified its 2013 appellate decision in Fifield v. Premier Dealer Services, Inc.

Employment Contract with Guaranteed Minimum Term not Terminable for Performance

On June 2, 2015, the Illinois Appellate Court, Second District, held that an employment agreement that guaranteed the employee a two-year minimum term of employment is not terminable for the employee's poor performance during the employment term.  Eakins v. Hanna Cylinders, LLC, 2015 IL App (2d) 140944.  This appeal involved a claim for breach of an employment contract.  The employment agreement guaranteed the employee a minimum term of employment of 24 months.  After 14 months, the employer terminated the employee, and did not pay him any salary after the date of termination.  The employer claimed that the employee had breached the contract by his poor performance and that therefore it had the right to terminate him for cause before the expiration of the employment term.  The employer also argued that an employer always retains the right to discharge an employee for cause regardless of the duration of the employment contract.  The employee contended that the employer had no right to terminate him for cause, because the employment agreement guaranteed employment and salary payment for a specific duration without any performance requirements or standards.

Failure to Pay Discretionary Bonus Actionable as Breach of Contract: Illinois Appellate Court

On March 17, 2015, the Illinois Appellate Court, First District, held that a terminated employee who was not paid a discretionary bonus by his former employer may state claims for breach of contract, unjust enrichment, and violation of the Illinois Wage Payment and Collection Act.  McCleary v. Wells Fargo Securities, LLC, 2015 IL App (1st) 14128-U (March 17, 2015).  The employee bonus plan at issue provided that payment of a bonus to an employee was entirely within the discretion of the employer.  At the time of his employment termination, the employee had met all criterion for entitlement to a bonus, including employment for at least three months of the bonus year.  After his termination, the employer unilaterally changed the terms of its bonus plan to require employment for at least six months during the bonus year as a condition to entitlement to the bonus.  The employee, who was employed for less than six months during the bonus year, was denied his bonus.

Illinois Appellate Court Affirms Jury Verdict for Defendant in Age Discrimination Case

On January 14, 2015, the Illinois Appellate Court, First District, affirmed a jury verdict in favor of the defendant in a state court age discrimination lawsuit brought under the Illinois Human Rights Act.  Cipolla v. Village of Oak Lawn, 2015 IL App (1st) 132228 (1-14-2015).  The plaintiff filed a charge of discrimination with the Illinois Department of Human Rights, and later filed a complaint in the circuit court of Cook County, in which she alleged that the defendant terminated her employment on account of her age in violation of the Illinois Human Rights Act.  Section 1-102(A) of the Act provides that it is the public policy of Illinois to secure freedom from discrimination against any individual because of her age or other protected class.  After a four-day trial, the jury returned a verdict in favor of the defendant.  The plaintiff appealed on several grounds and argued to the Appellate Court that the jury's verdict should be reversed and the case remanded for a new trial.

Noncompete Unenforceable where Employment less than 2 Years

On December 11, 2014, the Illinois Appellate Court, Third District, reversed the trial court's order granting a preliminary injunction that enforced a noncompetition agreement.  Prairie Rheumatology Associates v. Francis, 2014 IL APP (3d) 140338.  The restrictive covenant, part of a physician's employment contract, prohibited the physician from competing with her employer within a 14-mile radius of its office for two years after the termination of her employment.  Under Illinois law, a post-employment restrictive covenant is enforceable only if it is reasonable in geographic and temporal scope and necessary to protect an employer's legitimate business interest.  A restrictive covenant is reasonable only if it: (1) is no greater than required to protect a legitimate business interest of the employer; (2) does not impose undue hardship on the employee; and (3) does not harm the public.

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