The Illinois House and Senate have agreed on a version of the Illinois Freedom to Work Act, which is waiting for Governor Pritzker to sign into law. The Act puts restrictions on which employees can be subject to covenants not to compete and covenants not to solicit.
What constitutes “solicitation” in the context of a non-solicitation provision? A recent decision from the U.S. District Court for Central District of Illinois attempted to shed some light on that question.
Several bills are pending in the Illinois House of Representatives and Senate that, if signed into law, could radically change the landscape of the use of covenants not to compete and covenants not to solicit in Illinois. Employers should be aware of this pending legislation because, if passed, it could have serious ramifications for businesses in Illinois.
Several times a year, business owners tell me that restrictive covenants (such as non-competition, non-solicitation or non-disclosure provisions) are not enforceable in Illinois. That is not true. The state and federal courts in Illinois enforce restrictive covenants on a routine basis. However, to be enforced, the restrictive covenants need to have been properly drafted and kept up to date with changes in the law. Put another way, in the majority of cases where the courts do not enforce the restrictive covenants, the restrictive covenants could have been drafted in such a way that they likely would have been upheld.
When it comes to protecting a company’s competitive advantage, it is important to know the difference between confidential information and trade secrets. Knowing the difference allows businesses to design and implement the appropriate measures to protect their information and secure their competitive advantage.
A recent case from the Illinois Appellate Court is a reminder to business owners of the need to be proactive in protecting their trade secrets and confidential information. In this case, three sales representatives left their employer, who was in the radio advertising business, and joined a competitor. When they left, the three sales representatives were alleged to have taken with them their sales and renewal lead lists to help them solicit customers for their new employer.
As COVID-19 continues to take its toll on the economy, some will be looking to avoid certain contractual obligations, while others will be looking to hold parties to their contractual obligations. For those looking to avoid their contractual obligations due to COVID-19 in Illinois, one defense being discussed is the doctrine of impossibility of performance.
COVID-19 is impacting businesses and their operations, and parties are looking for guidance in the event that one or the other party to a contract is, or claims to be, unable to fulfill its contractual obligations. Whether or not the COVID-19 pandemic excuses contract performance largely depends on the language of the contract and the facts that either support excusing performance or not. For example, following the 1918 Spanish Flu Epidemic, a Court in California excused prompt performance, but not complete performance, after carefully analyzing the contract and the facts incident to delayed performance. See Citrus Soap Co. v. Peet Bros. MFG. Co., 50 Ca. App. 246 (1920).
In a somewhat unusual move, the state of Illinois has filed a complaint against Check Into Cash of Illinois, Inc., on behalf of the citizens of the state, seeking a declaration that the non-competition covenants that the company requires its employees to sign are unenforceable and violate the Illinois Freedom to Work Act, 820 ILCS 90/1.
An Illinois federal judge’s recent decision continues a trend toward supporting a “totality of the circumstances” approach to the enforcement of restrictive covenants.
In Stericycle, Inc. v. Simota, et al., 2017 WL 4742197, the defendants moved to dismiss plaintiff’s breach of contract claims arguing that 13 months of continued employment was inadequate consideration to enforce certain restrictive covenants. Following the majority of federal judges that have considered this issue in Illinois, Judge John J. Tharp found that if confronted with the issue, the Illinois Supreme Court would reject a bright line rule of two years of continued employment and apply a fact-specific approach in assessing consideration. Using this approach, Judge Tharp found that 13 months of continued employment was adequate consideration to support the enforcement of the restrictive covenants.