Knowledge Center

Wednesday, December 14, 2011

Client Alert: Recent Decision Regarding Enforceability of Restrictive Covenants

Click here for pdf version of alert

On December 1, 2011, the Illinois Supreme Court decided the case, Reliable Fire Equipment Company v. Arnold Arredondo, regarding the enforceability in Illinois of restrictive covenants, such as agreements not to compete and not to solicit customers, accounts or employees. The court outlined three factors that shape the reasonableness of a restrictive covenant: (1) the protection of a legitimate business interest; (2) scope; and (3) hardship on the public or on the individual subject to the covenant.


The court also ruled that the determination of a legitimate, protectable business
interest rests on the totality of the facts, with no specific fact having more weight than the others. The factors the court looked at included the near permanence of customer relationships, acquisition of confidential information through employment, and time and place restrictions.


The court used this case to reaffirm its prior decisions and clear up confusion resulting from recent appellate courts not following prior Supreme Court decisions. We encourage our clients to consider how this ruling affects their business. Please contact us for further information or if you would like to review your agreements with employees and contractors in light of this recent decision.

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