Legitimate Business Interests

Regardless of how well a covenant not to compete is written, no court will enforce it unless the employer can identify a legitimate business interest that the restrictive covenant seeks to protect. To determine if the employer has identified a valid, protectable business interest, the court will analyze the “totality of circumstances” surrounding the restrictive covenant. Identifying a legitimate business interest, however, is but one component of the court’s analysis, as our Chicago non-compete agreement litigation lawyers recognize.

To be enforceable, a restrictive covenant must also be reasonable which means that it protects the identified legitimate business interest without being so broad that it imposes an undue burden on the employee or public. To determine reasonableness courts will once again look at the “totality of circumstances.” The line between protectable and unprotectable business interests and reasonable and unreasonable restrictive covenants is a fine yet indistinctly drawn line. The courts’ lack of guidance and specificity in this area only highlights the need for a non-compete agreement litigation attorney in the Chicago area who is experienced in drafting and litigating restrictive covenants.

While courts have been reticent to define the term “legitimate business interest,” they have been clear regarding what is not a legitimate business interest. The term does not include merely protecting the employer from general competition. Courts have consistently held that employers do not have an interest in preventing employees from competing through the use of general knowledge, skill, or facility acquired by the employee through training or experience during employment. This means a restrictive covenant prohibiting an employee from using the general knowledge or skills she acquired while working for her former employer will not be enforceable because there is no protectable business interest involved that needs to be protected.

States vary in their methods for analyzing whether a covenant not to compete is enforceable to protect a legitimate business interest of the employer. The Illinois Supreme Court recently altered the standard for analyzing this issue. In Reliable Fire Equipment Co. v. Arredondo, 2011 IL 111871, the Illinois Supreme Court overturned a long line of appellate decisions which had limited the definition of a “legitimate business interest” to only two factors (whether the employer enjoyed a “near-permanent customer relationship” and whether the employee “had acquired confidential information during his employment and subsequently attempted to use it for his own benefit”). The Court decided instead that what constitutes a “legitimate business interest” must be determined by considering “the totality of circumstances” as opposed to applying the previously-used, rigid two-factor test. The Court did note, however, that these two factors would still be considered in the “totality of circumstances” test.

This puts the burden on the attorneys representing employers in cases of disputed non-compete agreements to prove, not only that the agreement is narrow enough to protect only the legitimate business interests of the company, but also that it is not place an undue burden on the employee or damage the public in anyway (such as by denying the public a much-needed service).

The Chicago non-compete agreement litigation attorneys at DiTommaso Lubin Austermuehle have decades of experience negotiating and litigating non-compete agreements. We have litigated cases of disputed non-compete agreements and negotiated non-compete agreements before signing. If you have questions about a non-compete agreement your employer wants you to sign, or one you've already signed, don't hesitate to contact us online or give us a call at 877-990-4990 to reach a non-compete agreement litigation lawyer at our Chicago firm.