There is a judicial split between federal judges in the Northern District of Illinois and the Illinois Appellate Court, First District, on the issue of whether two years of continued employment is required for adequate consideration to support a non-competition provision in an employment contract under Illinois law. In 2013, the Illinois Appellate Court, First District, held that (absent other consideration) at least two years of employment is required as consideration to support a non-compete or non-solicitation clause in an employment agreement. Fifield v. Premier Dealer Servs., Inc., 373 Ill.Dec. 379, 993 N.E.2d 938 (Ill.App.1st Dist. 2013). Otherwise, the non-compete or non-solicitation provision is unenforceable for lack of consideration, even if the employee left employment voluntarily.
Fifield was widely interpreted by employment lawyers and courts as having established a “bright-line” “two-year” rule. Indeed, in 2015, the Illinois Appellate Court, First District, followed Fifield and applied the two-year rule in McInnis v. OAG Motorcycle Ventures, Inc., 2015 ILApp. (1st) 130097 (June 25, 2015). The Illinois Supreme Court, however, has yet to decide this precise issue; and three federal district court judges in Illinois have rejected the two-year rule.
In Traffic Tech., Inc. v. Kreiter, No. 14-CV 7528 (N.D.Ill. Dec. 18, 2015), the court held that, “Illinois law does not require a strict application of the two-year rule in assessing the enforceability of a non-solicitation clause (or any similar restrictive covenant).” Instead, the totality of the circumstances should be evaluated, including whether the employee was fired or quit (a pivotal factor in the analysis). Earlier in 2015, another federal judge in Illinois reached the same result. Bankers Life & Cas. Co. v. Miller, 2015 WL 515965 (N.D.Ill. Feb. 6, 2015). The court reasoned that because the periods of employment in the Illinois appellate cases were so short, “they do not support the conclusion that Illinois applies a bright-line rule that two years is required….”
Predicting that the Illinois Supreme Court would not adopt such an inflexible approach, the court in Bankers Life ruled that the restrictive covenants at issue in that case did not fail for lack of consideration, even though the defendants were employed for less than two years. Similarly, in Montel Aetnastak, Inc. v. Miessen, 998 F.Supp. 2d 694 (N.D.Ill.2014), another federal judge declined to apply the two-year rule, stating that, “…the Court elects not to mechanically apply a bright-line test.” Using a fact-specific approach, the court found that 15 months’ employment, followed by a voluntary resignation, was enough to support the enforceability of the employment agreement. The disagreement between the Northern District and the Illinois Appellate Court on this hot-button non-compete issue warrants adjudication by the Illinois Supreme Court.