Your employer has asked you to sign an agreement restricting your work after your employment is over (non-compete). Is that legal...should you sign it? Here are some considerations:
1. Did you get something for it? A non-compete must be supported by consideration. This means that it needs to be part of your employment agreement, or if you are already employed, you need to be given some other benefit for agreeing to this extra restriction. This can be a change in status, a raise, a longer term on your contract, or some other tangible gain for you.
2. Is such a restriction necessary for this employer? In Illinois, a non-compete should only be used where there is a legitimate interest to protect. Does your employer have some confidential information that they have worked hard to create and to maintain? Does your employer have customer lists built over time that are significant and stable relationships? If the answer to both is "no," then there likely is no reason to have a non-compete restriction.
3. Is the non-compete period of time reasonable? The time period you are restricted from competition with your former employer should be related to the amount of time it took to develop the confidential information or customer relationships. Illinois courts have found restrictions reasonable where the time period was connected to the time it took to start to receive revenue from the customer relationship, for example.
4. Is the geographic area reasonable? Similar to the time restriction, Illinois courts will generally find the geographic restriction reasonable if it is limited to those areas where you have established relationships on behalf of the employer. Even if your employer's business has a larger geographic area than your personal work covered, in Illinois a non-compete is more likely to be upheld if it only restricts the area you personally had involvement. If your work covered the city of Chicago and the surrounding suburbs, it could be unreasonable to be restricted from your profession in a 100-mile radius around downtown Chicago.
5. Are you being restricted from activity that is reasonable? Your employer should only restrict you from those activities that are necessary to protect the business interest, so that you are not unfairly competing. Non-competes that tried to restrict an employee from working at all for a competitor, for example, were held to be unreasonable in Illinois. Instead, the employer should have narrowly tailored the restriction to just those activities which directly compete with your former employer.
Legal Tip Of The Day from Chicago lawyer Matt Miller: If you or your business suffer a loss that might be covered by insurance, you should not hesitate to notify your insurance company of the situation. Don't wait until you calculate every last dime or until you uncover every last detail. Put them on notice right away. If you wait too long, you might not be able to recover any insurance proceeds at all, even if the loss might otherwise have been covered.
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