by David McCarthy
It has long been my position that an attorney preoccupied with his/ her win-loss record would rather oppose a non-competition agreement than attempt to enforce it. They have been difficult to enforce in Illinois, and for good reason: They are a restraint on trade.
But the worm is turning. First, the "blue pencil rule" has gained some traction in Illinois. There was a time when our courts would withhold enforcement of a non-competition agreement if they determined that it was unduly broad in time or area, even if the agreement included a "blue pencil" clause.
The "blue pencil" clause, a staple of non-competition agreements, authorizes a court-ordered narrowing of time and area limitations if those which the agreement recites are deemed too broad. Illinois was slow to accept the "blue pencil rule" on the theory that it amounted to re-making the agreement of the parties. And this spared employers from a sordid temptation to overreach on the front end. After all, why not shoot for the moon -- write in outrageous time and area restrictions -- if, worst case, the court can be counted on to apply the "blue pencil rule" and pare back the time and area restrictions? Nonetheless, over time, the "blue pencil rule" has gained some favor in Illinois.
In September of 2009 one of our Illinois Appellate Courts took an even more dramatic step in favor of the enforceability of non-competition agreements. The Fourth District Appellate Court (central Illinois, including Springfield) held that the "legitimate business interest" prong of the analysis was irrelevant. For ages, the proponent of a non-competition agreement was obliged to establish (i) the reasonableness of the time and area restrictions and (ii) that enforcement (an injunction) was necessary to protect a "legitimate business interest" of the employer (e.g., an interest in preserving confidential information or a "near-permanent" relationship with customers). In today's Fourth District, the proponent need only show that the time and area restrictions are reasonable (and the "blue pencil rule" is often available in aid of that showing).
Does this matter in the real world? You bet it does. Some time ago, we successfully opposed an action to enforce a non-competition agreement on the grounds that the former employer did not have the "legitimate business interest" that was necessary to obtain an injunction. Our client spent all his time at the office of the customer, and the only "confidential information" accessible to him was the customer's information, not the employer's information. Additionally, the customer relied on its own personnel and a number of other outside organizations for the same sorts of services which the employer provided. Finally, despite allegations that "vast sums" had been expended to cultivate the customer, the evidence was to the contrary: All advertising was generic. No advertising was customer-specific. And beyond that the "vast sums" spent to woo the customer consisted of $130.00 doled out to buy lunch on a number of occasions.
All that would be irrelevant in today's Fourth District. Whether the law of the Fourth District will become the law elsewhere in Illinois remains to be seen. There is now a conflict among the districts, and one of the chief functions of the Illinois Supreme Court is to resolve conflicts among the Appellate Courts. Stay tuned.
It has long been my position that an attorney preoccupied with his/ her win-loss record would rather oppose a non-competition agreement than attempt to enforce it. They have been difficult to enforce in Illinois, and for good reason: They are a restraint on trade.
But the worm is turning. First, the "blue pencil rule" has gained some traction in Illinois. There was a time when our courts would withhold enforcement of a non-competition agreement if they determined that it was unduly broad in time or area, even if the agreement included a "blue pencil" clause.
The "blue pencil" clause, a staple of non-competition agreements, authorizes a court-ordered narrowing of time and area limitations if those which the agreement recites are deemed too broad. Illinois was slow to accept the "blue pencil rule" on the theory that it amounted to re-making the agreement of the parties. And this spared employers from a sordid temptation to overreach on the front end. After all, why not shoot for the moon -- write in outrageous time and area restrictions -- if, worst case, the court can be counted on to apply the "blue pencil rule" and pare back the time and area restrictions? Nonetheless, over time, the "blue pencil rule" has gained some favor in Illinois.
In September of 2009 one of our Illinois Appellate Courts took an even more dramatic step in favor of the enforceability of non-competition agreements. The Fourth District Appellate Court (central Illinois, including Springfield) held that the "legitimate business interest" prong of the analysis was irrelevant. For ages, the proponent of a non-competition agreement was obliged to establish (i) the reasonableness of the time and area restrictions and (ii) that enforcement (an injunction) was necessary to protect a "legitimate business interest" of the employer (e.g., an interest in preserving confidential information or a "near-permanent" relationship with customers). In today's Fourth District, the proponent need only show that the time and area restrictions are reasonable (and the "blue pencil rule" is often available in aid of that showing).
Does this matter in the real world? You bet it does. Some time ago, we successfully opposed an action to enforce a non-competition agreement on the grounds that the former employer did not have the "legitimate business interest" that was necessary to obtain an injunction. Our client spent all his time at the office of the customer, and the only "confidential information" accessible to him was the customer's information, not the employer's information. Additionally, the customer relied on its own personnel and a number of other outside organizations for the same sorts of services which the employer provided. Finally, despite allegations that "vast sums" had been expended to cultivate the customer, the evidence was to the contrary: All advertising was generic. No advertising was customer-specific. And beyond that the "vast sums" spent to woo the customer consisted of $130.00 doled out to buy lunch on a number of occasions.
All that would be irrelevant in today's Fourth District. Whether the law of the Fourth District will become the law elsewhere in Illinois remains to be seen. There is now a conflict among the districts, and one of the chief functions of the Illinois Supreme Court is to resolve conflicts among the Appellate Courts. Stay tuned.
