Thursday, March 10, 2016

Restrictive Covenants: You Snooze, You Lose

Bridgeview Bank Grp. v. Meyer, a recent, unpublished case coming out of the Illinois Appellate Court for the First District, reminds employers of just how important it is to take prompt and diligent action when an employee leaves and a restrictive covenant is in place.  In that case, plaintiff-bank sought a temporary restraining order after its former senior vice president allegedly violated a restrictive covenant contained in its employment agreement.  The agreement temporarily prohibited the employee from competing or soliciting the bank’s customers and employees.  Plaintiff-bank claimed that “in the course of reviewing its files,” the bank discovered that the employee “contacted customers of [the bank], divulged confidential information, and made disparaging remarks about” the bank, causing it irreparable harm.  Bridgeview Bank Grp. v. Meyer, 2016 IL App (1st) 160042, ¶ 3.  The court ultimately denied the bank’s request for a temporary restraining order, in part because the bank waited more than four months after the employee was terminated to seek such relief.  The court noted that although delay alone is not sufficient to deny a temporary restraining order, it is nonetheless one of the factors that is considered. Id. at ¶ 24.

The valuable lesson from this case is that employers should take immediate steps when an employee with a non-compete agreement departs.   Employers are encouraged to take the following actions:

  1. Ensure that the employee has a copy of the restrictive covenant;
  2. Remind the employee of the covenant when he or she departs;
  3. Investigate the departing employee’s work station to ensure that the covenant has not been breached;
  4. Consider conducting an exit interview to both investigate compliance and ensure that the departing employee is aware of his or her obligations; and
  5. Send timely cease and desist letters to the former employer and/or his or her new employer if non-compliance is discovered.

For more information on this topic, including the enforceability of restrictive covenants, contact Ancel Glink to speak with an experienced attorney specializing in labor and employment law.