Litigation: Non-Compete Agreement

When a company hires a new employee, that employee takes on a fiduciary duty not to compete with the employer as long as the employee continues working there. This includes working for a competitor or setting up one’s own competitive business, unless the employer has consented to such activity. Once the employment ceases, the employee is free to seek employment elsewhere without restriction. It is therefore common for an employer, when hiring a new employee, to require a non-competition agreement, in which the employee agrees not to compete with the employer for a specified period of time after leaving the employer. The enforceability of these agreements is the subject of near-constant dispute and litigation. Our team of Chicago non-competition litigation lawyers represent both employers and employees in disputes over these agreements, helping employers enforce them against former employees, and helping former employees find ways to challenge an agreement’s validity.

Non-Competition Agreements

Non-competition agreements provide employers with a certain degree of assurance that the employee, after obtaining specialized knowledge in the course of training and work experience, will not turn around and use that knowledge to benefit a competitor or to compete directly against the employer. Each state has its own set of rules and precedents regarding the validity and enforcement of non-competition agreements. Caselaw, which is always in flux, heavily influences the interpretation of these agreements. As the employment marketplace changes, and workers move from one job to another more often, the nature of non-competition agreements may have to change.

Validity and Enforceability

To be enforceable in most states, non-competition agreements must be limited in both their duration and their geographic scope. A non-competition agreement must specify a duration, such as six months from the date the employee stops working for the employer, that it remains in effect. After that time, the employee is released from the agreement’s prohibitions. It must also define a reasonable geographic area within which the employee is prohibited from competing. This could be within a ten-mile radius of the employer’s location, or within a particular city or municipality. A nationwide or perpetual prohibition on competition is unlikely to be enforceable.

Non-competition agreements must also describe the prohibited competitive activities with enough specificity to allow a reasonable person, not to mention a court, to understand what is not permitted. It should identify the business, profession, market, or area of expertise in which the employee may not compete.

In some states, a non-competition agreement’s validity may depend on its timing. If the employer presented it to the employee as a condition of employment, it would probably be enforceable. If the employer merely provided it to the employee after they accepted employment, then it might be invalid for lack of consideration.

Enforcement

A valid and enforceable non-competition agreement usually includes provisions for enforcement, and remedies for breach. An employer may bring suit for alleged breach of the agreement, or an employee may seek a declaration that the agreement is invalid or unenforceable, either in general or as pertains to the employee’s circumstances. Remedies for breach of a non-compete agreement could include liquidated damages, compensation for an employer’s actual losses, or injunctive relief.

Serving Chicago and beyond, our non-competition litigation lawyers have decades of experience prosecuting or defending non-compete agreement cases. We have won cases for businesses against competitors or employees that have violated their agreements. We have also successfully defended employees, businesses or franchisees charged with violating non-compete agreements. The only way to successfully defend or prosecute these cases is to obtain a detailed factual knowledge of the business issues involved and the nature of customer relationships and claimed confidential information. After obtaining a detailed knowledge of these issues by interviewing our clients and reviewing business memoranda and other documents and communications, we develop a winning strategy for litigating or settling the matter. We also flag issues that require expert testimony and key issues that could result in success at settlement or trial. We offer free consultations for you to tell us about your matter and for us to come with strategies for defending or prosecuting your non-compete agreement case. This consultation will give you the opportunity to size us up and determine if we are the right lawyers to represent you.

DiTommaso♦Lubin’s business litigation attorneys have offices in Oakbrook Terrace and Chicago, Illinois. We represent clients throughout Illinois, including the Chicago metro area and DuPage County, as well as Indiana and Wisconsin. To schedule a consultation with a Chicago non-competition litigation attorney, contact us via email, at (877) 990-4990, or locally at (630) 333-0000.

Chicago Business Litigation Lawyer Blog - Non-Compete Agreement / Covenant Not to Compete