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Illinois’ First Appellate District appears to change the rules for non-compete agreements.
Small businesses routinely use non-compete agreements to lock down key employees and keep them from competing against their employers later on. When drafted and executed properly, those agreements can be very useful tools for protecting your company’s client lists, business contacts, and other confidential information.
Non-compete agreements are contracts: a series of promises that each side makes to the other in consideration for something—either money, other assets, or the exchange of promises. In other words, if there is no consideration exchanged, then one side has just given the other a naked promise rather than entering into a contract.
Illinois courts have historically considered the promise of employment as adequate consideration for a non-compete agreement entered into by the employer and employee at the time the employee is hired—I promise to hire you and you promise to not compete against me after you leave. But there were some restrictions placed on this. For example, an employer couldn’t hire someone on those terms, then immediately turn around and fire them just to keep them out of the market. The employer had to keep them on staff for a significant amount of time for the promise of continued employment to be sufficient to justify the promise to not compete. And the non-compete could still be enforced if the employee voluntarily left rather than being terminated.
But an Illinois appellate court seems to have recently turned these rules on their head. In Fifield v. Premier Dealer Services, Inc., (read it here)the appellate court held that, in order for continued employment to qualify as adequate consideration for a promise to not compete against the employer, the employee has to be continuously employed for two years, even if the employee quits rather than being terminated. The employer in that case argued that there were also other promises that could act as the required consideration, such as that the non-solicitation and confidentiality provisions only were effective if the employee continued working for a year. But the court rejected these arguments, too.
This is just one case, but it demonstrates the importance of reviewing your company’s non-compete agreements periodically to make sure they remain enforceable. Call us today to schedule an opportunity to go over your company’s employment agreements.
Employer inquiries or use of credit history in hiring and employment decisions is now prohibited under Illinois law.
As of January 1, 2011, Illinois employers are no longer allowed to inquire about or use the credit history of an employee or prospective employee when making hiring, recruiting, discharge, or compensation decisions. The Employee Credit Privacy Act (ECPA), P.A. 096-1426, was signed into law by Illinois Governor Pat Quinn on August 10, 2010. The ECPA also protects persons from discrimination or retaliation if they file a complaint or participate in an investigation relating to violations of the Act. There are limited exceptions to the ECPA relating to the credit-check prohibition. An employer is allowed to access individual credit checks for certain employment involving bonding or security, unsupervised access to more than $2500, signatory power over more than $100 in assets, and access to confidential or trade secret information. Additionally, banks, insurance companies, and many public sector jobs are also exempted from the credit-check prohibition. It is important to recognize that employers are still permitted to conduct background checks of applicants and employees as long as the background check does not include a credit history.
New dangers for employers under the Amended Illinois Wage Payment & Collections Act.
On July 30, 2010, the Illinois Wage Payment and Collection Act (WPCA), 820 ILCS 115/15, et seq. was amended. These amendments took effect on January 1, 2011. The WPCA was enacted to provide employees with protections against illegal withholdings from their wages. Under the amended WPCA, the Illinois Department of Labor (IDOL), wage orders now will be considered final agency decisions that may be enforced by the IDOL or challenged by an employer in the state trial courts under the Administrative Review Law, 735 ILCS 5/3-101, et seq. Previously, IDOL wage orders were not self-enforcing and the IDOL was required to file suit in the state trial courts to enforce its wage orders. The effect of this amendment is that employers now will have to fully address wage claims brought before the IDOL and the IDOL’s decisions will be subject to limited judicial review. The amended WPCA now also allows an employee to file actions for alleged violations directly in the state court and recover, if successful, its costs and reasonable attorneys’ fees. The amended WPCA now also permits the filing of class action lawsuits against employers and protects employees from retaliation for reporting alleged violations of the Act. The amendments also allow employees to now recover two percent interest per month from the time of the underpayment of wages, as opposed to recovery of interest after successful adjudication of claims as is the current law. Lastly, the criminal penalties under the Amended WPCA have been increased whereby repeat violators will be subject to a Class 4 felony if convicted twice within a two-year period.
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