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Illinois Appellate Court confirms that two years of continued employment required for non-compete

An Illinois appellate court recently reaffirmed that, absent additional consideration, two years of continued employment is required to support a restrictive covenant.  The so-called “two year rule” was previously recognized by the First District Appellate Court in Fifield v. Premier Dealer Services, Inc. The Fifieldcourt held that, without some added benefit like a raise or bonus, two or more years of continued employment is required to constitute adequate consideration for a non-compete.

Yet it was unclear how much traction the two-year rule would gain and whether other Illinois courts would follow suit.  The Illinois Supreme Court elected not to review the Fifield decision.  Further complicating the picture, an Illinois federal court declined to apply Fifield, stating that there is no bright-line rule in Illinois on the length of employment required to support a non-compete.

In a recent ruling, however, the Third District Appellate Court readily followed and applied Fifield’s two-year rule.  In Prairie Rheumatology Associates, S.C. v. Francis, the court reiterated that continued employment is sufficient consideration for a non-compete only where the employment is for a substantial period of time.  Citing Fifield, the court held that two or more years of continued employment amounts to adequate consideration.

The Prairie Rheumatology decision signals growing acceptance of the two year rule in Illinois.  Employers with Illinois-based operations or employees should consider offering key employees additional consideration (such as a bonus or raise) in exchange for signing a non-compete in order to guard against the employee leaving prior to two years, potentially rendering the agreement unenforceable for lack of consideration.  At a minimum, Illinois-based employers should consider the two year rule when drafting restrictive covenants and evaluating actions to enforce them.

February 05, 2015

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