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New Illinois Supreme Court Decision on Enforceability of Non-Compete Agreements: Good News for Employers!

December 2011

By: Nancy E. Joerg, Esq.

In a dramatic decision issued by the Illinois Supreme Court on December 1, 2011 ( Reliable Fire Equip. Co. v. Arredondo , 2011 IL 111871), the Illinois Supreme Court announced a test making it easier for an Illinois employer to go into court and enforce a non-compete agreement.

The Illinois Supreme Court overturned the decision of the Appellate Court below as well as the Circuit Court of DuPage County. In what turns out to be good news for employers, the Illinois Supreme Court found that whether or not a legitimate business interest is supported by a reasonableness finding should be based on the totality of the circumstances.

The Illinois Supreme Court announced a new balancing test to determine the reasonableness of a non-competition agreement. The Circuit Court in DuPage County had found the non-compete agreement at issue to be unenforceable. The Appellate Court upheld the DuPage Circuit Court's opinion. The Illinois Supreme Court reversed in favor of the employer.

The successful employer at issue (Reliable Fire Equipment Company) sells, installs and services portable fire extinguishers. The employee (accused by Reliable of violating Reliable's non-compete agreement) was a systems technician and salesperson for Reliable. The Illinois Supreme Court noted that a non-compete agreement will be upheld if it contains a reasonable restraint and the agreement is supported by adequate legal consideration.

In its December 1 st decision, the Illinois Supreme Court flatly rejected the old "legitimate business interests test." The Illinois Supreme Court stressed the totality of the circumstances must be determined on the case's own particular facts. The Illinois Supreme Court noted that the same identical non-compete contract and non-compete restriction may be reasonable and valid under one set of circumstances and unreasonable and invalid under another set of circumstances! The Illinois Supreme Court Decision states:

Whether a legitimate business interest exists is based on the totality of the facts and circumstances of the individual case. Factors to be considered in this analysis include, but are not limited to, the near-permanence of customer relationships, the employee's acquisition of confidential information through his employment, and time and place restrictions. No factor carries any more weight than any other, but rather its importance will depend on the specific facts and circumstances of the individual case.

Any client who has questions about the enforceability of a non-compete agreement or wishes to discuss creating or strengthening a non-compete agreement (or wishes an analysis to see if a certain situation would be appropriate for a non-compete agreement) should contact Attorney Nancy E. Joerg of Wessels Sherman's St. Charles, Illinois office at 630-377-1554 or via email at najoerg@wesselssherman.com. Protect your business ; establish strong and enforceable non-compete agreements.