Continued Employment as Consideration for Postemployment Non-Compete Clauses

McInnis v. OAG Motorcycle Ventures, 2015 IL App (1st) 130097 (here), provides valuable insight concerning the enforceability of restrictive covenants in employment contracts. The appellate court began by summarized the requirements for an enforceable restriction on an employee’s future employment, namely, that the restrictive covenant is (1) ancillary to a valid contract, (2) supported by adequate consideration, and (3) reasonable.

Moving to the heart of the matter, the court evaluated the adequacy of the consideration supporting the restrictive covenant in McInnis’s employment contract with OAG. The court recognized that employment for a substantial period of time after initiation of an at-will employment agreement can be sufficient consideration. But the court also noted that Illinois case law appears to require at least two years of continuous employment to permit a finding of adequate consideration. Since McInnis had been employed by OAG for only 18 months, the court found the consideration inadequate and affirmed the trial court’s denial of OAG’s motion for a preliminary injunction enforcing the covenant.

The majority opinion in McInnis holds that for continued employment standing alone to constitute adequate consideration, the employment must continue at least two years. Employment for a shorter period is insufficient. The dissent argued that such a “bright-line” test is illogical and unfair and that there is no reason that employment for 23 months should automatically be deemed inadequate consideration to support a restrictive covenant.

The value of the opinion lies not only in its thorough discussion of Illinois cases on the two-year “bright-line” rule but also in its discussion of the split among the federal courts interpreting Illinois law on the issue.