Employment contracts

7th Circuit Affirms Summary Judgment in Title VII Gender Discrimination Lawsuit

On August 28, 2015, the 7th Circuit affirmed summary judgment in a sex discrimination lawsuit brought under Title VII and the Equal Pay Act.  Packer v. Trustees of Indiana University, No. 15-1095 (7th Cir. 8-28-2015).  The plaintiff alleged that her employer subjected her to various adverse treatment and discharged her from employment because of her gender.  She also claimed that she was a victim of gender-based pay discrimination and retaliation for making internal complaints of discrimination.  The employer contended that it discharged her for legitimate, non-discriminatory reasons.  There were not enough citations to specific portions of the record to counter the motion for summary judgment.  For instance, the plaintiff did not identify any similarly situated male employees who were paid more than she was paid.  Therefore, the court could not even reach the issue of whether there was justification for the pay disparity.

7th Circuit Affirms Preliminary Injunction Enforcing Non-Compete Clause in Employment Contract

On July 29, 2015, the 7th Circuit affirmed the district court's entry of a preliminary injunction that enforced a non-competition clause and a non-solicitation provision contained in an employment contract.  Turnell v. Centimark Corporation, No. 14-2758 (7th Cir. July 29, 2015).  The employment agreement contained restrictive covenants that barred the employee from competing with the employer or soliciting its customers for two years after termination.  Fired after 35 years, the employee defected to a competitor.  Litigation ensued.  The court enjoined the employee from selling his former employer's products to its customers in the Midwest for two years.

7th Circuit Reverses 1.5 Million Dollar Jury Verdict in Employment Contract Case

On June 30, 2015, the U.S. Court of Appeals for the 7th Circuit reversed a 1.5 million dollar jury verdict in favor of a high-end computer system salesman, who filed a lawsuit against his employer alleging that it breached his employment contract by failing to pay his commission on a seven-figure sale.  Lawson v. Sun Microsystems, Inc., Nos. 13-1502 & 13-1503 (7th Cir. June 30, 2015).  The salesman's compensation package included a base salary and commissions under the employer's annual incentive plan.  After a trial, the jury found in his favor and awarded him 1.5 million in damages.  The company appealed.  The 7th Circuit held that the sale in question did not qualify for a commission under the terms of the incentive plan.

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.

7th Circuit Affirms Invalidation of Restrictive Covenants

On July 14, 2015, the United States Court of Appeals for the 7th Judicial Circuit affirmed the district court's ruling that former employees of an information technology staffing firm were not liable for breach of restrictive covenants under Illinois law.  Instant Technology LLC v. DeFazio, et al., Nos. 14-2132 & 14-2243 (7th Cir. 7-14-2015).  The employees had signed employment agreements in which they agreed to not solicit business from the employer's clients, recruit the employer's employees to other jobs, or disclose confidential information.  After the employees started a competing business, the employer filed a lawsuit against the employees in federal district court for breach of the restrictive covenants in their employment agreements.  After a bench trial, the court concluded that the employees were not liable.

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.

Employment Contracts not always Terminable At-Will

On May 13, 2015, the 7th Circuit reversed the district court's entry of summary judgment in a case involving an alleged breach of an employment contract.  Burford v. Accounting Practice Sales, Inc., et al., No. 14-2692 (7th Cir. 2015).  The parties had entered into a contract to market and facilitate the sale and purchase of accounting practices.  The contract provided that APS could terminate the contract only if Burford violated it, while Burford could terminate any time on 30-days' notice.  Under Illinois law, employment contracts of indefinite duration are terminable at-will by either party at any time.  For instance, a contract with an initial term of 12 months that automatically renews every year for another 12 month term, without the need for either party to take action, is of indefinite duration and therefore terminable at will.

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.

Part-Owner Not an Employee Entitled to Title VII Protection

On October 15, 2014, the 7th Circuit affirmed summary judgment in a Title VII and ADA action on the basis that the plaintiff--a part-owner of the defendant business--was not an employee and therefore not covered by Title VII or the ADA.  Bluestein v. Central Wisconsin Anesthesiology, No. 13-3724 (7th Cir. 10-15-2014).  In order to be entitled to protection under Title VII, a person must be an employee of an employer that employs 15 or more employeesIn Bluestein, the plaintiff filed a Title VII and ADA lawsuit against a company in which she was a partner/shareholder and member of the Board of Directors.  She had an equal right to vote on all Board matters, shared equally in the profits and liabilities of the company, participated in hiring and firing decisions, and had an equal right to influence employment policies. 

Illinois Appellate Court Holds that Arbitration Clause in Employment Contract is Valid and Enforceable

On June 9, 2014, the Illinois Appellate Court, First District, held that an arbitration clause contained in an employment contract is valid and enforceable.  Fuqua v. SVOX AG, 2014 IL App (1st) 131429.  The arbitration clause stated that arbitration is the exclusive remedy for, "[a]ny dispute or controversy arising under or in connection with this Agreement or any other dispute concerning [employee's] employment with [employer]."  However, the clause carved out an exception for restrictive covenants and confidentiality provisions, which could be enforced in court.  The Appellate Court stated that the Illinois Uniform Arbitration Act (710 ILCS 5/1) is controlling, which applies contract law to arbitration agreements.  The Appellate Court found that the arbitration clause is supported by the offer of employment, acceptance of the offer, and consideration--the employment (which lasted only 8 months).  The Appellate Court also found that there are no grounds for revocation of the arbitration clause because it is not procedurally or substantively unconscionable.  The employment law claims subject to the arbitration clause in Fuqua include breach of contract and retaliatory discharge, as well as alleged violations of the Illinois Wage Payment and Collection Act, the Illinois Whistleblower Act, and the Illinois Personnel Record Review Act. 


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