Employment law perspectives: restrictive covenants: Illinois appellate court finds “bright line” rule requiring at least two years of employment as consideration
On June 24, 2013, the Illinois Appellate Court entered an important decision for employees and employers in Fifield, et al. v. Premier Dealer Services, Inc., 2013 IL App (1st) 120327. Illinois law has long recognized that a restrictive covenant in employment is enforceable when the employee engages in “substantial continued employment” after the employee signs the agreement. Now, the Illinois Appellate Court has held that a restrictive covenant agreement requires at least two years of post-signing employment or some other consideration for the agreement to be enforced, even if the employee voluntarily resigns. Many employers require new employees to sign restrictive covenants upon hiring, and the general legal argument has been that the continued employment was adequate consideration. After Fifield, that argument is moot and employers will have to rethink how to adequately support such agreements or be otherwise creative in protecting their business interests when employees leave. Now employers must take into consideration that: (1) continued employment post-signing must be for at least two years; (2) the rule applies whether the employee voluntarily resigns or is terminated; and (3) the rule appears to apply to all restrictive covenants executed prior to or after employment commences.