Generally, a non-compete agreement requires that an employee not work in an industry by not working for a competitor or starting a competing company.Non-compete clauses are frequently added to severance agreements, though some employees are asked to sign a covenant not to compete when hired or during the course of employment.Some of these non-compete agreements are unenforceable because they are overly-broad or for some other reason. However, even if a non-compete would be unenforceable under Illinois law, its may still cause a prospective employers not to hire an employee.Be sure to have an attorney review any non-compete or severance agreement before signing it.
On December 2, 2011, the Illinois Supreme Court issued an important decision concerning restrictive covenants in Reliable Fire Equipment Co. v. Arredono. In the matter, former Reliable employees, who formed their own company, sought judgment that the restrictive covenants not to compete that they had signed were unenforceable.The Court affirmed the legitimate business interest requirement three prong test to determine enforceability of restrictive covenants not to compete. Three-part test for reasonableness of restrictive covenants includes legitimate business interest of employer as an elements. The Court held that “whether a legitimate business interest exists is based on the totality of the facts and circumstances of the individual case. Factors to be considered . . . include . . . the near-permanence of customer relationships, the employee’s acquisition of confidential information through his employment, and time and place restrictions." Further, the importance of each factor depends on the particular facts and specific circumstances of each case.Likewise, the Court held that the Kolar two-factor test "is no longer valid." Reliable Fire Equipment Company v. Arredondo, 2011 IL 111871 (2011).http://www.state.il.us/court/Opinions/SupremeCourt/2011/December/111871.pdf