In a landmark decision just issued, the Illinois Appellate Court, Fourth District, ruled that an ex-employer seeking to enforce a covenant-not-to-compete against former sales personnel need only show that the time-and-territory restrictions are reasonable and need not prove, in addition, that there is a sufficient legitimate-business-interest in enforcement.
In Sunbelt Rentals, Inc. v. Ehlers, No. 4-09-0290 (9/23/09), the appellate tribunal agreed with the trial judge that the defendants’ conduct amounted to breach of a reasonable contract and affirmed the entry of a preliminary injunction prohibiting the defendants from violating the covenant. The appellate court held for the first time that the plaintiff’s business interest – that is, a showing not only that the time-and-territory restrictions were reasonable but also that the ex-employer had a “near permanent relationship” with customers and/or that information it provided to ex-employees was confidential – is irrelevant. In the process, the court overruled a number of its own prior decisions and criticized the reasoning of virtually every previous Illinois intermediate appellate decision in point.
Interestingly, the primary basis for this dramatic shift is the absence of any mention of the legitimate-business-interest test in a 2006 Illinois Supreme Court opinion (Mohanty v. St. John Heart Clinic, S.C., 225 Ill. 2d 52, 866 N.E.2d 85) enforcing a restrictive covenant. (For entertainment, read the Sunbelt court’s explanation for affirming the circuit court judge notwithstanding that judge’s indisputable violation of the principle “that a trial court is not free to ignore binding precedent from the appellate court in its own district.”)
Note that the time to seek rehearing of the Sunbeltdecision, or a petition for leave to appeal to the Illinois Supreme Court, has not yet expired.