Knowledge Center

Friday, August 09, 2013

Illinois Appellate Court: Less Than Two Years of Continued Employment Is Insufficient to Enforce a Restrictive Covenant

A recent decision by the Illinois Appellate Court provides that, absent other consideration, in order for a post-employment restrictive covenant to be enforceable, "there must be at least two years or more of continued employment to constitute adequate consideration in support of a restrictive covenant."  The court further held that this rule applies even if the restrictive covenant is signed at or prior to the commencement of the at-will employment, and also applies "even if the employee resigns on his own instead of being terminated."   Fifield v. Premier Dealer Services, Inc., 2013 IL App (1st) 120327; 2013 Ill. App. LEXIS 424 (June 24, 2013).

In Fifield v. Premier Dealer Services, Eric Fifield worked for a subsidiary of an insurance company that marketed finance and insurance products to the automotive industry. The assets of Fifield's company were sold to Premier and he was informed that his employment
would be ending in October 2009.  Premier offered Fifield employment on the condition that he agree to non-solicitation and non-competition restrictive covenants for a two-year period after the termination of his employment. Fifield negotiated a release from the restrictive covenants if he was fired without cause during the first twelve months of his employment, and signed the restrictive covenants prior to beginning work at Premier. Fifield resigned from Premier three months later and moved to a competitor of Premier. Fifield and his new employer sought a declaration that the post-employment restrictive covenants with Premier were unenforceable. The Circuit Court and the Appellate Court agreed, finding that the offer of at-will employment absent additional consideration in exchange for the non-solicitation and non-competition restrictive covenants was inadequate consideration to support their enforcement where the employee is employed for less than two years after the time the employee signs the restrictive covenant. The Fifield court held that this rule applies both where an employee signs the restrictive covenant upon hiring and where the employee signs the restrictive covenant after the employee commences work. 

Based on Fifield, the enforceability of any post-employment restrictive covenants that are not supported by additional consideration is in jeopardy when the employee's employment ends before two years after the date the employee signs the restrictive covenants.

To discuss specific questions or recommendations, please contact Hal Wood at (312) 606-3219, Shelley Koren at (312) 606-3244 or any of the attorneys in the Business and Finance or Litigation Groups at Horwood Marcus & Berk Chartered.

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