Readers of this blog know that long settled understandings regarding what constitutes adequate consideration for a restrictive covenant in Illinois were turned upside down when the First District Appellate Court in Illinois held in Fifield v. Premier Dealer Services, 2013 IL App. (1st) 120327 that, absent other consideration, two years of employment are required for a restrictive covenant to be supported by adequate consideration, regardless of whether the covenant was signed at the outset of employment or after, and regardless of whether the employee quit or was fired.
The Illinois Supreme Court declined to hear Fifield, and three federal judges in Illinois have declined to apply it. However, the only other Illinois appellate court decision to address Fifield applied it without dissent.
Last week, the First District Appellate Court issued another decision applying Fifield, holding in McInnis v. Oag Motorcycle Ventures, Inc., 2015 IL (1st) 13097 that, in the absence of other consideration, 18 months of employment was not sufficient consideration for a restrictive covenant. By itself, this ruling was not particularly noteworthy, except to the extent that the court confirmed that other consideration, combined with employment of less than 24 months, can constitute adequate consideration for a restrictive covenant.
What is noteworthy about this ruling, however, is the dissenting opinion by Justice Ellis, in which he wrote as follows:
I do not believe that a per se rule exists in Illinois, requiring that an at-will employee remain employed for at least two years – not one day less – after signing a restrictive covenant before sufficient consideration is found to exist. Nor do I believe that a bright-line, two-year rule is warranted. I also believe that the circumstances under which plaintiff left employment – whether he left voluntarily or was fired – are relevant to the determination. Cases like these are inherently fact-specific, and I do not believe that this area of the law is the place for bright-line rules that remove relevant facts from consideration.
While a dissent carries no weight by itself, it may foretell a continued judicial discussion on this issue, particularly given that three different federal judges in Illinois have declined to follow Fifield based on their prediction that the Illinois Supreme Court would likely disagree with it.
Given that state supreme courts in Wisconsin and Kentucky both recently weighed in on whether mere continued employment is sufficient consideration for a non-compete (“yes” in Wisconsin, “no” in Kentucky) and given that the Pennsylvania Supreme Court recently heard oral argument on this issue, the question of what is adequate consideration for a restrictive covenant is one of the hottest topics in non-compete law. Employers should continue to monitor this issue.
- Member of the Firm