Have a Reasonable Geographic Scope
Non-compete agreements that prevent a former employee from working in a wide geographical area will not be enforced by Illinois courts. Agreements that prohibit employees from working anywhere in the State almost certainly are unenforceable. Whether a geographic scope is too broad is a factual determination to be made by the court, but if the geographic area in which the employee is prohibited from working makes it difficult for the employee to find a new job the non-compete agreement will probably be found overly broad and not enforceable.
Have a Reasonable Time Period
Non-compete agreements that last forever, are not enforceable. Even those that last five years are generally not enforceable. Again, what constitutes a reasonable time period depends on the facts of each case, but courts have generally found restrictions lasting two or three years to be enforceable.
Have Reasonable Work Restrictions
Again, restrictions that make it very difficult for a former employee to find new work will not be enforced. Prohibitions on working in a particular industry are not valid. Reasonable work restrictions should be narrowly tailored to prohibit a former employee from working for a particular competitor or in an area where the employee has a reasonable possibility of taking the employer’s clients.
Non-solicitation agreements (i.e. agreements where an employee agrees not to solicit customers or employees) are also permissible as long as they do not impose too much of a hardship on the former employee. As explained below, an employee needs to receive something in exchange for the non-solicitation agreement for it to be enforceable.
Tie the Non-Compete Agreement to Something Other than Employment
Since an at-will employee can be fired at any time, courts find that simply being hired is not a fair trade for a non-compete agreement. The employer needs to provide the employee with something in exchange for the agreement not to compete, like health insurance or severance benefits.
It is also permissible, and probably advisable, to provide different compensation (in exchange for the agreement not to compete) to different employees. Giving a highly paid employee a laptop computer in exchange for a non-compete agreement may not be found to be a fair trade by a court while giving this same consideration to a lesser paid employee likely would be.
Also, remember that non-compete agreements for low-wage workers (currently those making less than $13/hr.) have been illegal since the Freedom to Work Act took effect three years ago.
Review the Non-Compete Agreement Over Time
A non-compete agreement that was signed twenty years ago may not be valid today. Industries change, new competitors emerge, and the law changes. Have your attorney review your non-compete agreements every few years to make sure that they are still enforceable.
You should not use the same non-compete agreement for each position within your company. Every non-compete agreement should be carefully tailored to a particular position and, in some cases, each employee. Feel free to contact me (email: mdicianni@ancelglink.com, phone: 312-604-9125) if you would like me to draft a non-compete agreement or review your existing ones.
