Two-Year Rule for Non-Compete Agreements in Illinois
The Illinois Appellate Court ruled that a non-compete clause is invalid unless an employee works at least two years for the employer. The only exception to this “rule of thumb” is if an employer provides the employee some other benefit to agree to the non-compete provision.
A recent Illinois Appellate Court ruling – Prairie Rheumatology Associates, S.C. v. Francis – will benefit employees, while also providing some clarity regarding the law of non-compete clauses.
During the summer of 2013, the Illinois Appellate Court in the First District made an important decision in Fifield v. Premier Dealer Serv., 2013 IL App (1st) 120327.
Recently in Francis, the Illinois Appellate Court in the Third District confirmed the previous ruling by stating that there is a “2-year rule of thumb” requiring employees to work at least two years for an employer before a court will enforce a non-compete provision. (The recent Francis decision is available here).
Background on the Francis Decision
- In Francis, our law firm represented a rheumatologist who worked 19 months for a practice group. Her employment agreement included a two year non-compete clause which prevented her from working as a rheumatologist within fifteen (15) miles of her previous job. The rheumatologist’s previous employer also made several promises to her specifically in exchange for her agreeing to the non-compete clause.
- The Appellate Court in Francis ruled that the non-compete was invalid. First, the rheumatologist did not work the required two years, she only worked 19 months. Second, the former employer failed to fulfill the promises it made to the rheumatologist.
- This new decision is critical because it is the first Appellate Court in Illinois to explicitly follow the previous 2013 ruling. Prior to this Francis decision, some courts outside of Chicago were unclear about the proper standard when determining whether a non-compete clause was valid. This new ruling should provide clarity.
- Another key factor is that in the previous 2013 ruling, the employee worked for the employer for only three months. Thus, many commentators believed that a court would not apply the two year rule to an employee that worked for an employer for close to two years. However, in Francis, the rheumatologist worked for 19 months, which the Appellate Court stated was “5 months less than the general 2-year rule of thumb.”
- Finally, the recent decision provides employers with insight on how to enforce a non-compete clause when an employee works for an employer for less than two years. According to the decision, a court may enforce a non-compete clause if an employer gives an adequate benefit to an employee specifically for the non-compete provision. However, there will be some ambiguity regarding this part of the decision because a court will have to determine if the benefit the employer gives to the employee for the non-compete provision is adequate.