In a 2-1 decision, the Illinois Appellate Court, Third District, affirmed summary judgment awarded to an ex-employee in an action brought by the ex-employer to enforce an employment agreement restrictive covenant. Brown & Brown, Inc. v. Mudron, No. 3-06-0908 (Ill. App., 3d Dist., Mar. 11, 2008). The agreement provided that it was to be construed in accordance with Florida law where the ex-employer is incorporated. Even though Section 542.335(g) of the Florida statutes provides expressly that “a court: (1) Shall not consider any individualized economic or other hardship that might be caused to the person against whom enforcement is sought,” the court ruled that Illinois law was applicable (based on Section 187 of the Restatement (Second) of Conflict of Laws), that the Florida statute “is contrary to Illinois’s fundamental public policy,” and that Illinois law requires consideration of the hardship a restrictive covenant imposes on the ex-employee.
The court also held that the covenant was unenforceable because it was supported by inadequate consideration. The ex-employee resigned approximately seven months after signing the employment agreement. Noting that “Illinois courts depart from the traditional rule that the law does not inquire into the adequacy of consideration, only its existence,” the court held that “[s]uch a short period of time of continued employment is not sufficient consideration under Illinois law to support the restrictive covenant.”
The dissenting justice was aghast at the ruling regarding inadequacy of consideration. In the case cited by the majority as support for that ruling, the court had emphasized the peculiar facts present there: the covenant was signed by the employee in exchange for a promised promotion which was given and then almost immediately retracted, whereupon the employee quit. There is a “[b]ig difference,” the dissenting justice observed, between an employee like the one in the cited case who resigns “because the consideration failed,” and the Mudron majority’s holding “that the consideration failed because [the ex-employee] quit.” He added that the majority’s decision “renders all restrictive employment covenants illusory in this state. They would all be voidable at the whim of the employee.” Further, Mudron was a breach of contract lawsuit, whereas the cited case was an action for an injunction in which the court had “observed that even a peppercorn of consideration is sufficient to support a finding of adequate consideration when one seeks damages at law while more should be required when one seeks equitable relief.”