Articles Posted in Non-Compete Agreement

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Non-Competes Now a Nonstarter

This is really big news!

Businesses that have entered into non-compete agreements with current or recently departed employees will need to come up with other ways of achieving the investment-protecting goals those non-competes were designed to accomplish. That’s because the Federal Trade Commission has issued a final rule, which will take after 120 days after publication in the Federal Register, that invalidates current non-competes for most workers and bans new ones for all employees.

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Are Non-Competes Really Enforceable?

Most non-compete agreements between employers and employees violate the National Labor Relations Act, according to a May 30 memo from Jennifer A. Abruzzo, general counsel for the National Labor Relations Board.  Such agreements, which bar employees from taking certain types of positions or running certain types of businesses after leaving their current positions, specifically run afoul of Sections 7 and 8(a)(1) of the act, she wrote.

Section 7 provides that employees have a “right to self-organization, to form, join or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection,” Abruzzo noted.  As such, under most non-competes, employers engage in an unfair labor practice that violates Section 8(a)(1) because they “interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in [S]ection 7.”

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Illinois Freedom to Work Act 

Illinois Employers who want to protect their business and trade secrets by using restrictive employment contracts will find new hoops to jump through.   The enforcement of non-compete and non-solicit agreements, designed to erect roadblocks to prevent former employees from gaining an unfair advantage due to their proprietary knowledge of your business or relationships with your customers, has always been tricky.  But a recent law will make it more complicated.

An amendment to the Illinois Freedom to Work Act that will take effect on January 1, 2022, will create new hurdles for business owners hoping to prevent employees who have left on frosty terms from exploiting their knowledge of customer contacts, pricing and other trade secrets that could enable them to take shortcuts to parity as your adversary.

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Are Employee Non-Compete Agreements Still Valid for Low-Level Employees? Non-Compete-Clause-e1417451038467-300x171

Non-compete arguments are staple in every Chicago Business Lawyer’s legal arsenal and a necessary to protect a business under certain circumstances.  A non-compete agreement, also known as a non-competition covenant or clause, is an agreement between an employer and an employee that places restrictions on the employee after the employment relationship ends.  Non-compete agreements can be useful tools for businesses that want to protect their investment in the training and development of their staff.  Typically, these agreements restrict former employees from working for certain competitors for a specified period of time.  Although Illinois courts tend to dislike non-competes, courts will enforce a non-compete agreement if drafted property.

When considering the enforceability of non-compete agreements, Illinois courts look to see if the agreement is reasonable and supported by adequate consideration.  In particular, when determining the reasonableness of a non-compete, the court considers whether the terms of the agreement are no more than what is required to protect the legitimate business interest of the employer, and narrowly tailored in terms of time, activity and place.

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