Howard Peritz

Illinois Court perspective on non-competition agreements

The Illinois Supreme Court has completely changed the way the Courts are to look at non-competition agreements. The decision seems to favor the entity attempting to enforce the non-competition agreement. In the case of Reliable Fire Equipment Co. v. Arredondo, 2011 IL 111871 published on December 1, 2011, the court confirmed that an employer must demonstrate a “legitimate business interest” (LBI) to enforce an otherwise reasonable post termination restriction on competition.

The decision, however, broadened what might constitute an LBI. The LBI is no longer limited to the protection of confidential information of “near-permanent customer relationships. An LBI may now be based upon the “totality of the circumstances.” Unfortunately for the employers and employees, the Court left unspecified what and how many factors may combine to create an LBI and how those factors are weighed against the restrictions sought against the employee. What does this mean to the employer? Most likely more restrictive covenants will have to be litigated and appealed to give the appellate and Supreme Courts the opportunity to provide more guidance that the Supreme Court has in this matter.

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