Employment contracts

7th Circuit Affirms Summary Judgment on Claim for Breach of Employee Compensation Plan but Reverses Summary Judgment on Illinois Wage Claim

On June 25, 2018, the 7th Circuit affirmed the district court's grant of summary judgment on a claim for breach of an employment compensation plan, but reversed the district court's grant of summary judgment on the plaintiff's wage claim under the Illinois Wage Payment and Collection Act.  Sutula-Johnson v. Office Depot, Inc., No. 17-1855 (7th Cir. 6/25/2018).  The plaintiff sued her former employer alleging that its changes to her employee compensation plan for selling office furniture breached its employment contract with her and violated the Illinois Wage Payment and Collection Act (the "Act").  In her claim for breach of employment contract, the plaintiff contended that the defendant did not effectively amend its employment contract with her until she signed a written acknowledgement form on a certain date.  She argued that prior thereto, any amendment to her employment contract was without consideration; and that she did not accept the new terms until she signed them.  Thus, it was the plaintiff's position that a new contract was not formed until she signed the acknowledgment, and that the defendant breached her previous contract by failing to comply with the old compensation plan through the date she signed the acknowledgement.  She also argued that the defendant breached her employment contract by retroactively reducing her commissions.

7th Circuit Affirms Summary Judgment on Section 1981 Employment Discrimination and Retaliation Claims

On June 19, 2018, the 7th Circuit affirmed an order of summary judgment in favor of a defendant employer in a federal lawsuit in which the plaintiff, former employee alleged that the defendant laid him off and failed to rehire him because of his race and in retaliation for his EEOC charge.  Oliver v. Joint Logistics Managers, Inc., No. 17-1633 (7th Cir. 6/19/2018).  The plaintiff sued his former employer under Section 1981 of the Civil Rights Act of 1866, alleging that it discriminated against him when it laid him off and when it hired another applicant to fill an open position.  He also alleged that the employer retaliated against him because he filed a charge of discrimination with the EEOC.  The 7th Circuit concluded that the plaintiff failed to present essential evidence in support of each of his claims.

U.S. Supreme Court Upholds Employment Arbitration Agreements that Require Individualized Arbitration of Labor Law Disputes

On May 21, 2018, the United States Supreme Court, in a landmark employment law decision, held that arbitration agreements providing for individualized arbitration proceedings to resolve labor disputes must be enforced.  Epic Systems Corp. v. Lewis, 584 U.S. __ (2018).  Justice Gorsuch wrote the majority opinion, in which Justices Roberts, Thomas, Alito and Kennedy joined.  The case involved employers and employees who entered into employment contracts providing for individualized arbitration proceedings to resolve employment law disputes.  The employees nonetheless sought to litigate Fair Labor Standards Act ("FLSA") wage and hour claims through class or collective actions in federal court.  The Federal Arbitration Act ("FAA") generally requires courts to enforce arbitration agreements according to their terms unless they are invalid under contract law.  However, the employees argued that the FAA's savings clause removes the requirements to enforce arbitration agreements if the arbitration agreement violates some other federal law; and that by requiring individualized arbitration proceedings to resolve wage and hour claims, which would preclude employees' rights to litigate labor claims on a class-wide or collective basis, the arbitration agreements violated the National Labor Relations Act ("NLRA") and therefore are invalid and unenforceable.  The majority rejected the employees' arguments, stating that the employment law arbitration agreements "must be enforced" and that "neither the Arbitration Act's savings clause nor the NLRA suggest otherwise."

Covenant not to Compete Held Unenforceable under Illinois Law

On April 17, 2018, a U.S. District Court judge for the Northern District of Illinois ruled that under Illinois law, a covenant not to compete is unenforceable per se if the covenant, on its face, restricts an employee from taking any position with another company that engages in the same business as the employer, without regard to whether that position is similar to the position that the employee held with the employer or otherwise competes with the employer.  Medix Staffing Solutions, Inc. v. Dumrauf, 17 C 6648 (N.D.Ill 4/17/2018).  The employee entered into an employment at-will, confidentiality, and non-compete agreement with the employer and subsequently executed an employee confidentiality/non-compete agreement.  The agreement included a covenant not to compete that restricted the employee, for a period of eighteen (18) months following termination of employment, within a radius of 50 miles from any office of the employer where the employee performed services for the employer, from employment in any capacity with any business that either offers a product or services in actual competition with the employer, or which may be engaged directly or indirectly in the employer's business.

Illinois Appellate Court Reverses Dismissal of Retaliatory Discharge Claim

On April 16, 2018, the Illinois Appellate Court, First District, reversed the dismissal of an Illinois common law retaliatory discharge claim.  Roberts v. Board of Trustees Community College, 2018 IL App (1st) 170067 (4/16/2018).  The plaintiff filed a lawsuit against his former employer alleging claims for common law retaliatory discharge, violation of the Illinois Whistleblower Act, and wrongful termination.  The circuit court dismissed the retaliatory discharge claim and whistleblower claim.  The First District reversed the dismissal of the plaintiff's retaliatory discharge claim, but affirmed the dismissal of his claim under the Whistleblower Act.  Illinois follows the employment at-will rule, which means that an employee who does not have a specified term of employment under an employment contract is subject to termination by the employer at any time for any or no reason, with or without notice.  However, Illinois recognizes an exception to the general employment at-will rule when the discharge violates a clear mandate of public policy.

Federal Judge Rules that Non-solicitation Provision of Employment Agreement is Enforceable

On October 20, 2017, a federal district court judge for the Northern District of Illinois held that a non-solicitation restrictive covenant contained in an employment contract was not unenforceable for lack of adequate consideration, even though the defendants were employed for fewer than two (2) years.  Stericycle, Inc. v. Simota, et al., No. 16 C 4782 (N.D.Ill. 10/20/2017).  In so holding, the court rejected the Illinois Appellate Court's ruling in Fifield v. Premier Dealer Servs., 2013 IL App (1st) 120327, which held that a non-competition or non-solicitation restrictive covenant contained in an employment at-will employment agreement is unenforceable for lack of adequate consideration when the employee was employed for fewer than two (2) years.  Several other Illinois Appellate Court decisions have followed Fifield and adopted the so-called "two-year rule," but the Illinois Supreme Court has not reached the issue.  Accordingly, federal court judges are not bound to follow Fifield, and instead must make a predictive judgment on how the Illinois Supreme Court would decide the issue.

Illinois Appellate Court Affirms $2,838,968 Judgment for Executive Severance Pay and Bonus

On July 18, 2017, the Illinois Appellate Court, First District, affirmed the trial court's judgment in favor of an executive employee against his employer in the amount of $2,838,968 for his earned bonus and severance pay.  Schultze v. ABN AMRO, Inc., et al., 2017 IL App (1st) 162140 (7/18/2017).  The plaintiff filed a lawsuit alleging that the defendants violated the Illinois Wage Payment and Collection Act (the "Act") by failing to pay him the proper amount of his earned bonus and severance pay.  After trial, the trial court ruled in favor of the plaintiff, and ordered the defendants to pay him $2 million as an earned bonus and $375,000 as severance, plus 5% interest and attorneys' fees.  On appeal, the defendants argued that the bonus was discretionary and that the plaintiff failed to execute a separation agreement and release that was a condition of receiving any severance.

Sexual Harassment and Retaliation Lawsuit Against Employer not Subject to Arbitration Agreement Between Employee and Staffing Agency

On July 17, 2017, the 7th Circuit affirmed an order of the district court that denied an employer's motion to compel arbitration of an employee's Title VII sexual harassment and retaliation claims based on an arbitration agreement between the employee and the staffing agency who placed her with the employer.  Scheurer v. Fromm Family Foods LLC, No. 16-3327 (7th Cir. July 17, 2017).  The employee filed a sexual harassment and retaliation lawsuit under Title VII of the Civil Rights Act of 1964 ("Title VII").  The employee's contract with the staffing agency that placed her with the employer contained an arbitration clause.  The employer moved to compel arbitration of the employee's claims, but the district court denied the motion.

Non-renewal of Employment Contract Constitutes Adverse Employment Action for Retaliation Claim

On May 23, 2017, the Illinois Appellate Court, First District, held that the non-renewal of an independent contractor's employment contract with the State of Illinois constitutes adverse job action for purposes of a retaliatory discharge claim under the State Ethics Act.  Wynn v. Illinois Department of Human Services, 2017 IL App (1st) 160344 (May 23, 2017).  In this case, a contract employee alleged that the state violated the Illinois Ethics Act by intentionally not renewing his independent contractor employment agreement in retaliation for his protected activity of reporting an alleged improper, unauthorized state expenditure to an auditor.  After a one-day bench trial, the plaintiff was awarded $782,253.

No Waiver of Employer's Right to Terminate Employment Contract when Employer gave Employee a Chance to Improve his Performance

On March 13, 2017, the 7th Circuit affirmed a jury verdict in favor of an employer in a lawsuit in which an employee alleged that the employer breached and waived its right to terminate an employment agreement that was terminable only for cause.  Burford v. Accounting Practice Sales, Inc., et al., No. 16-1871 (7th Cir. 3/13/2017).  This case involved an employment contract that provided the employee with an exclusive sales territory.  The employment agreement stated that the employer could not terminate the contract unless it was violated by the employee.  Based on this language, the contract was not terminable "at will," but only terminable for cause.  The contract gave the employer the option to terminate the agreement if the employee failed to meet his sales goals.


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