Thursday, December 12, 2013

Illinois Business Owners: The "Good" Employee and Non-Compete Agreements

A Will County, Illinois business owner has built a profitable business that provides recycling services and data protection services for over 800 businesses in Cook County, Will County, Kane County, Kendall County and DuPage County.  This Illinois business has built its excellent  reputation on quality and timely customer service provided by its sale representatives who are encouraged to build strong business relationships with its customers.  During the early years of the business, the Illinois business owner decided to require all of his employees to sign non-compete agreements to avoid competing with an employee leaving the company and starting a similar business.

The Illinois business owner has developed and trained personally all of its sale representatives and technicians. As with all companies, there are always a few employees that go above and beyond to ensure that the business runs smoothly and efficiently. One such employee has been with the Illinois business from the beginning  and has complete access to all of the confidential customer records and pricing models. This employee is always the first to arrive at work and the last to leave.  The employee provide services to customers on weekends, holidays, and on vacation. This employee has very strong relationships with over half of the customers of the Illinois business.

The "good" employee abruptly decides to resign.  The Illinois business owner is surprised by the employee's action and even more surprised when several customers decide not to renew their contracts with the Illinois business.  Curiously, all of the businesses that did not renew their contracts were serviced by the employee who resigned.

The Illinois business owner finally realizes that the departing employee has started a competing business. The Illinois business owner contacts his former employee and reminds him about the signed non-compete agreement. The non-compete agreement does not allow the employee to compete with the Illinois business owner for five years and within 50 miles of its Will County business location.

Finally, the Illinois business owner is forced to file a motion for a temporary restraining order and preliminary injunction. The employee's attorney files a declaratory judgment action claiming that the  non-compete agreement is not enforceable.   The Illinois business owner is surprised that the court finds that the non-compete agreement is unenforceable because the geographical and time restraints were unreasonable despite the fact that the Illinois business owner had a legitimate business interest in the confidential customer lists and pricing models.

The takeaway is that whether a non-compete agreement is enforceable in Illinois primarily depends upon the "totality of the circumstances" of each individual case. Illinois business owners may wish to obtain carefully drafted non-compete agreements to avoid unnecessary uncertainty as to whether the agreement will be enforced.

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