The Federal Trade Commission has proposed an imminent ban on noncompete
contracts. Prohibiting these contracts is an important step toward assuring
we still have access to the American Dream. It will help businesses innovate
in our tight labor market, ensure workers are not stuck in dead-end jobs
and make the United States more competitive with regards to our foreign
If you’ve been employed, odds are that at some point you have heard
of noncompete contracts, and there is a good chance you may have signed
one. Historically, businesses used them with high-level executives to
prevent them from taking trade secrets to competitors. However, in the
last half century, many businesses have abused noncompete contracts by
using them to avoid competition or prevent workers from leaving.
For example, I have defended in court non-English-speaking cleaning people
who were sued for having the audacity to switch jobs in violation of their
noncompete contracts. The Illinois attorney general once sued Jimmy John’sover its use of noncompete contracts for sandwich-makers. The list of noncompete
abuses is long and gut-wrenching and there is no right to a free lawyer
when a worker is sued for violating a noncompete contract.
Building upon and invoking existing antitrust law, the FTC proposes that
noncompete clauses be barred as an unfair method of competition. The rule
also would require employers to rescind any existing noncompete clauses.
The evidence examined by the FTC demonstrates that noncompete clauses
suppress wages, reduce competition and stifle innovation.
Workers bound by noncompete clauses regularly ask employment lawyers: “I
signed a stack of onboarding paperwork on my first day on the job that
had a noncompete. It isn’t enforceable, is it?” They are shocked
to learn how much it will cost to “get out” of their noncompete
contract when they are sued. As a result, few employees ever challenge
noncompete contracts and instead reluctantly comply with them while giving
up better job opportunities, resulting in less money for them and their families.
FTC economists estimated that noncompete contracts suppress American workers’
income by $250 billion to $296 billion per year. This is not surprising.
Why would an employer pay competitively if an employee is contractually
prohibited from leaving?
Equally troubling, even if an employee is willing to take the risk of getting
sued, many prospective employers simply will not hire a candidate subject
to a noncompete contract. Whether or not the fear is realistic, prospective
employers today rarely perceive hiring a worker as being worth the risk
of getting dragged into a lawsuit.
Noncompete contracts also hurt innovation by preventing competitors, particularly
startups, from hiring talented workers. Entrepreneurship and startups
are historically a driver of job creation and technological advancement.
However, noncompete clauses prevent people with good ideas from being
able to interact with others, killing innovation at the start. On top
of that, new companies and startups have a harder time finding qualified
talent because prospective employees are tied up with noncompete contracts.
Likewise, many entrepreneurs cannot start a new business, which results
in fewer marketplace options for consumers.
The proof is in the Golden State: In California — which has long
banned noncompete agreements — worker mobility helped launch that
state’s roster of high-tech companies, which includes Apple, Google,
Facebook and Uber. Innovation and hard work — in other words, our
human resources — are always what have made America competitive
against our foreign competitors.
Some companies, particularly those businesses that have their employees
locked up with noncompete contracts, are wary of doing away with noncompete
clauses. It is important to recognize that the FTC is not proposing to
ban nondisclosure agreements, confidentiality or trade secret laws. Therefore,
businesses will continue to have ample protection for their business interests.
These companies, however, will need to rely on courting their talent, instead
of threatening to take their talent to court.
In Illinois, a non-compete agreement is an agreement signed by an employee
often upon being hired or upon acceptance of a severance package. The
non-compete agreement typically limits an employee from competing with
their former employer during and after termination of employment.
Non-competes protect an employer from competition by:
Restricting the geographical area in which an employee can work if their
new position operates in the same industry as their previous employment
Restricting an employee from using an employer’s confidential information
for their or their new employer's benefit
A typical non-compete agreement says something to the effect of “Employee
agrees they will not work for any similar business in the same or a similar
role within 10 miles of an employer’s headquarters during employment
and for 1 year thereafter.”
Fish Potter Bolaños, P.C. has extensive experience helping Naperville
& Chicago residents review their non-compete agreements. Schedule
your case review by calling
Are Non-Completes & Non-Solicit Agreements Enforceable in Illinois?
In Illinois, non-compete agreements are only enforceable if they protect
legitimate business interests.
A legitimate business interest is determined from the totality of the circumstances,
the near permanence of customer relationships.
the employee’s acquisition of confidential information through his
time and place restrictions.
Whether or not a non-compete agreement is enforceable is dependent on the
individual agreement at issue. Illinois courts, under certain circumstances,
will enforce a non-compete contracts when the terms of the agreement are
reasonable. That is, the agreement will be deemed valid when it is limited
in duration and geographical scope and when it is narrowly tailored to
protect only that information which needs protection (i.e. confidential
or sensitive information).
In essence, to be enforceable, the employer must be able to show it has
a legitimate business interest in protecting the information it seeks
to keep confidential.
Some of the relevant factors in Illinois to determine if a non-compete
agreement is enforceable are:
whether the non-compete agreement is no greater than required to protect
the employer’s business interest.
whether the non-compete agreement imposes undue hardship on the employee.
whether enforcing the non-compete agreement would prove harmful to the public.
Importantly, in determining whether an agreement is valid, courts attempt
to balance the employee’s right to earn a living against the employer’s
interest in protecting its information.
A court may deem an agreement unenforceable if it:
is overly restrictive.
unfairly limits the ability of workers to earn a living.
provides for an unreasonably long period of time.
seeks to protect information that is not sensitive or confidential.
Frequently Asked Questions
Do I have to agree to a non-compete agreement? By law, you cannot be required to sign a non-compete agreement in Illinois.
However, declining may jeopardize your current role or a potential job
offer that’s on the table. Just as employees are not required to
sign a non-compete agreement, employers are not beholden to maintain (or
hire) employees who refuse to sign. With that said, there are some workers
in Illinois where noncompete agreements are not enforceable. Examples
include lower wage employees and, ironically, lawyers.
Is there a way out of a non-compete? Yes. Employees have the right to try to negotiate the scope of a non-compete
both on the front end (before signing it)-- or on the back-end (when they
are trying to get a new job). Sometimes employers refuse to modify noncompete
agreements. At that point, employees can seek a declaration in court that
the non-compete agreement is unenforceable, invalid, or illegal. Many
employers are concerned about having their “standard” non-compete
deemed unenforceable as it could set a precedent to let other employees
out of their agreements. In Illinois, sometimes an employee can recover
their legal fees if an agreement is found unenforceable.
What makes a non-compete agreement “reasonable” vs. “unreasonable?” Generally, the courts consider the following factors when determining the
reasonableness of a non-compete agreement:
whether the employer is protecting a legitimate business interest by enforcing
whether the agreement has been enforced in the past, and for how long;
whether the employer offered the employee extra compensation or additional
benefits for signing the agreement;
whether the geographic scope of the restriction prevents the employee from
making a living;
whether the agreement prevents the employee from performing a very different
type of work than what they currently do.
What happens when you violate a signed non-compete agreement? Violating a non-compete agreement may result in different outcomes. While
some employers may choose to do nothing, they are within their rights
to sue an employee for breaking the agreement. They may seek an injunction
to prevent the employee from further violations. The court typically handles
situations like this in an expedited manner, as the employer’s business
interests are believed to be at stake, so time to hire an attorney and
take action will be limited.
What can/should be negotiated in a non-compete agreement? If you’re going to agree to a non-compete as an employee, it’s
in your best interests to focus on three elements specifically:
Carve outs—Try to carve out things that matter to you. For example, if you are bringing
a book of business, ask to have those clients carved out. If there are
particular employers you would want to work at, consider asking them to
Duration – Most non-compete agreements last for two years or less, so your goal should
be to limit the duration of your non-compete to as little time as possible
Aim for six months to a year if possible.
Geographic scope – As much as possible, try to limit the area of restriction to only what
your employer is most concerned about. You’ll want to avoid industry-wide
restrictions and geographic boundaries that cover large territories.
Can Employers Agree Not To Hire Each Others’ Employees?
Agreements among competitors not to hire each other’s employees are
closely scrutinized. In Illinois, there have been cases challenging these
restrictions as anti-competitive and/or alleging non-solicit agreements
(even if not in writing) as antitrust violations. So called non-solicitation/no-poach
agreements are closely scrutinized when there is no legitimate purpose
for the restriction. Likewise, competitor agreements to limit the salary
or compensation paid to employees can subject employers to antitrust liability.
How Fish Potter Bolaños, P.C. Can Help with Your Non-Compete Case
At Fish Potter Bolaños, P.C., our non-compete lawyers share over
a century of experience handling labor and employment disputes, and we’re
here to help you through this difficult time. We understand the complexities
of non-compete and non-solicit agreements as they pertain to current positions
of employment and job offers. If you have questions about the terms of
an agreement as an employee, we can review and advise. If you need help
enforcing an agreement as a local small-business owner, we can help with that too.
Don’t hesitate to contact our non-compete attorneys for legal help
in Naperville and Chicago. We can be reached at (312) 818-2407 or via our
online contact form here.
Our Non-Compete Agreement Cases
Some non-compete and/or non-solicitation disputes we have handled in Illinois:
Defended a former employee of a large financial institution who sued after
he and several people he supervised went to work for a competitor. The
lawsuit alleged that our client had stolen trade secrets by taking electronic
files, breached his fiduciary duty by soliciting other employees to leave,
and violated a non-solicitation contract.
We achieved a favorable resolution for our client within 8 months of when
the lawsuit was filed.
We, along with co-counsel, represented the founder and former officer of
a company who was sued for misappropriating trade secrets, violating an
agreement to not compete after a buy-out, and allegedly utilizing confidential
information. The company sought a preliminary injunction and damages.
A hearing/trial was heard before American Arbitration Association in Chicago,
Illinois and our client prevailed.
Defended a former employee of an Illinois based bank who was sued after
it was alleged that he was a loan officer who violated his employment
contract and misappropriated bank assets and committed violations of the
Illinois Trade Secrets Act.
All claims against our client were voluntarily dismissed. (Cook County, Illinois)
Obtained dismissal, on jurisdictional grounds, for employee accused of
claims under Defend Trade Secrets Act (“DTSA”) and other contract
claims, including restrictive covenants, for joining alleged competitor.
When our client opened her own business in Chicago, her prior employer
sued in Cook County to get an injunction to stop her from operating and
sought money against her for soliciting customers and clients. We filed
a motion to dismiss the case. The judge ruled completely in our client’s
favor. The case was dismissed with prejudice so our client could continue
operating. Judge Mary Colleen Roberts’ well-reasoned ruling dismissing
the case with prejudice is available
To read more about our noncompete litigation case results, click