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.

Illinois Gets Tough on Wage Theft

Illinois Gets Tough on Wage Theft

Illinois amended the Wage Payment and Collection Act (“IWPCA”) to give employees new powers and protections when an employer fails to pay an employee her “final compensation” or otherwise violates the IWPCA (other provisions specify when wages must be paid, what deductions are allowed, and what records must be kept).

The IWPCA requires employers to pay a departing employee all final compensation owed no later than the next scheduled payday. “Final Compensation” includes everything the employer owes the employee for “wages, salaries, earned commissions, earned bonuses, and the monetary equivalent of earned vacation and earned holidays, and any other compensation...”

The amendments to the IWPCA give the employee added rights and powers including to:
· Pursue more individuals for personal liability through a broader definition of employer
· Go straight to court without first filing a claim with the Illinois Department of Labor (“IDOL”)
· Bring a case as a class action
· Recover reasonable attorney’s fees if she prevails
· Obtain additional damages of 2% per month of the amount not paid
· Receive a penalty from the employer of 1% per day if the employer fails to pay the court ordered amount within 35 days of the order
· Sue for retaliation if an employer discriminates against an employee for making an IWPCA complaint and recover her damages, costs, and reasonable attorney’s fees.

The amending act – known as the Illinois Wage Theft Enforcement Act – is available here:
http://www.ilga.gov/legislation/publicacts/fulltext.asp?Name=096-1407&GA=96

Submitted by Brian D. Moore, Class of ‘92
brian@moorelawpc.com
www.moorelawpc.com

Can an Employer make hiring decisions based on an applicant's credit history?

Illinois' Employee Credit Privacy Act, 820 ILCS 70/1, et seq., became effective on January 1, 2011.  That Act makes it illegal for employers to:

• Refuse to hire or recruit, discharge, or otherwise discriminate against an individual with respect to employment, compensation, or a term, condition, or privilege of employment because of the individual's credit history or credit report;
• Inquire about an applicant's or employee's credit history; or 
• Order or obtain an applicant's or employee's credit report from a consumer reporting agency.

So, in other words, an applicant's or employee's credit history is completely off limits for employment purposes, under most circumstances.  The statute provides for a private right of action for anyone injured by a violation of this act.  Injured parties can also recover attorneys' fees pursuant to the Act.

It is also worth noting that certain industries are specifically excluded from the definition of "employer," including banks, insurance companies, and law enforcement officials.  Also, the statute does not apply if a satisfactory credit history is an established bona fide occupational requirement.  In order to determine whether an established bona fide occupational requirement exists, the statute gives a seven-part test, only one element of which must apply.  

HERE is a link to the statute.

Credit information can no longer be used in employment decisions.

On August 10, 2010, Governor Quinn signed the Employee Credit Privacy Act (H.B. 4658) into law. The Act prohibits most employers from using an applicant’s or employee’s credit history or other credit information as a factor in any employment decision (e.g., hire, discharge, terms of employment).

The Act applies to employers of any size, but certain employers are specifically excluded from the Act’s coverage. Many governmental employers, as well as banks, savings and loan associations, other financial institutions, debt collectors, insurance companies, and surety businesses are specifically excluded from the Act’s prohibitions.

Employers may not retaliate or discriminate against a person for exercising rights under the Employee Credit Privacy Act. Employers who violate the Act may be sued and ordered to pay damages including attorneys’ fees. Further, the Act does not allow waivers of the Act’s rights and invalidates any such waivers that exist.

The effective date of the Act is January 1, 2011.