SimplyHR | Employment & Labor Blog 

In August 2021, Illinois Gov. J.B. Pritzker signed into law amendments to the Illinois Freedom to Work Act that will dramatically change the use of non-compete and non-solicitation agreements by Illinois employers. These amendments become effective January 1, 2022, and apply only to agreements entered into after that date.

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.

As many employers continue to deal with the prospect of a more remote workforce moving forward, what are the best practices related to restrictive covenants, information privacy, employee onboarding, and protecting trade secrets? Greensfelder attorneys Jim Ferrick, Jill Luft and Chris Pickett recently presented “Restrictive Covenants and Trade Secret Considerations for a Remote Workforce” for the St. Louis chapter of the Association for Corporate Counsel, covering steps to protect confidential business information. Here are nine key takeaways from their discussion.

A recent Illinois Appellate Court decision serves as a good reminder that when it comes to restrictive covenants, one size does not fit all. A consistent theme in recent court decisions has been that “form” employment agreements with overly broad restrictions not anchored to the employee’s job responsibilities and related to the employer’s protectable interests will not be enforced.

As two federal courts recognized in February 2015, Illinois law is unsettled as to the duration of continued employment that is sufficient consideration to support a non-compete agreement. In Bankers Life And Casualty v. Miller¹,a February 2015 federal court decision applying Illinois law, the court held that there is no bright line test for the length of continued employment sufficient to support a post-employment restrictive covenant specifically rejecting the argument that employment less than two years is inherently insufficient consideration under Illinois law. And in Cumulus Radio Corporation v. Olson and Alpha Media, the court recognized that the Illinois Supreme Court would likely embrace the same sort of fact specific approach to assessing the adequacy of consideration that it applies to determine whether the restrictions are reasonable.

Buyer beware as the asset protection afforded by non-disclosure and non-solicitation agreements signed by prospective purchasers may not survive the sale. This issue was addressed in a recent federal decision in Illinois offering some cautionary reminders for business buyers. In this case, Keywell LLC (“Keywell”) sought to sell its assets. Croniment Holdings, Inc. (“Croniment”), a bidder for Keywell’s assets, signed a non-disclosure agreement (the “NDA”) which prohibited Croniment from disclosing Keywell confidential information and prohibited Croniment from hiring any of Keywell’s employees with whom Croniment came into contact during negotiations. Keywell and Croniment entered into an asset purchase agreement by which Croniment would serve as the stalking horse bid for Keywell’s assets in bankruptcy.

Business Tip: Include a liquidated damages clause in your restrictive covenant agreements that clearly sets forth how damages will be calculated in the event your employee breaches the non-competition agreement.

As a President, CEO or General Counsel of your company, you have recognized the need to have your key executives and employees enter into non-competition or non¬-solicitation agreements. Those non-competition agreements are usually a cost effective way to stop your key executives and employees from competing against when they leave your company. However, in those instances where you have to go to court to enforce your non-competition agreement, the experience can be costly, in terms of attorneys' fees, your time and your company's resources.