Tuesday, October 15, 2013

Illinois Supreme Court: Fifield Stands

When the Appellate Court of Illinois ruled in Fifield v. Premier Dealer Services, Inc. that an
employer needed to provide consideration beyond mere employment itself to validate a non-compete, most business (read: management-side) attorneys thought this decision was a misread that was inevitably headed for reversal.

Not so.

The Supreme Court of Illinois has denied the Petition for Leave to Appeal that Premier Dealer Services filed after Fifield prevailed on his consideration argument. Anyone following this blog knows I have been critical of the Fifield holding to the extent it applies broadly to employees who choose to leave their employment voluntarily and in its rather arbitrary setting of a two-year period in which an employee must remain employed for the employment itself to constitute sufficient consideration for the non-compete.

But now that Fifield stands, what impact will this have? Here's several implications:

(1) Venue fights are inevitable. The Appellate Court has five districts. The First (from which Fifield hath sprung) is by far the largest and includes Cook County. However, many employers operate in other counties that are both nearby and outside the First District. Look for employers to enforce covenants outside Cook County and include choice-of-venue clauses in contracts that get them out of the First District.

(2) A potential conflict may be looming. I have heard stories of employers in other districts (namely, the Fourth - generally viewed as the most friendly towards enforcement) setting up lawsuits to create a conflict with Fifield. It will be worth watching if an employer has a suit disposed of quickly to get it to the appellate court and potentially create a district split. This would enhance the chances for the Supreme Court to take a case, much like it had to do with Reliable Fire Equipment Co. v. Arredondo a few years back.

(3) Employers will look to rewrite their agreements. Now that the consideration rule effectively grants at-will employees the opportunity to void their non-competes for a two-year period after the start of employment, employers are scrambling to fix contracts. My experience is that this new decision may mean employers will create contracts that contain consideration in the form of: (a) a guaranteed term of employment; (b) a severance or garden-leave option triggered post-termination; or (c) a signing bonus that is irrevocable.

(4) Some legislator will introduce something in January that addresses this. (Note: This is not a real implication because most proposed legislation never goes through committee, and this wouldn't generate any attention at all. At least that's my opinion.)

For several years, the playing field in non-compete suits was whether the employer had a legitimate business interest to protect. Now, it will be the question of contract formation entirely - whether the employer ever provided enough consideration to make the non-compete enforced at all.

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