Once a stalwart of adequate consideration in exchange for a restrictive covenant, new employment, remains in flux after the Fifield v. Premier case was not taken up by the Illinois Supreme Court recently.
Fifield, decided in the summer of 2013 by the First District Appellate Court, held that in order for employment to be adequate consideration for a non-compete, employment must last at least two years. The fact pattern of the case was somewhat unique in that Fifield, an employee of a subsidiary of Great American, signed a new covenant agreement with Premier, a company that purchased Fifield’s employer and offered him employment at the newly acquired business. Hence, Fifield’s employment appeared more similar to continued employment than actual new employment. However, in making its decision, the Appellate Court treated new employment and continued employment the same resulting in what appears to be a significant departure from traditional notions of adequate consideration in Illinois and elsewhere.
Typically, in the vast majority of states in the U.S., a new employee’s employment is contingent upon signing a restrictive covenant agreement. Therefore, new employment is adequate consideration for a covenant agreement. Many times, additional consideration is also recited in the body of the covenant agreement also in exchange for the covenants. These items include equity grants, monies, bonuses, benefits, and the provision of trade secrets or confidential information. The Fifield appellate opinion did not address these items.
Consequently, courts and employers are faced with numerous consideration questions not addressed by Fifield or elaborated on by the Illinois Supreme Court. Was other consideration provided to Fifield besides employment? What other consideration is still recognized in Illinois as adequate? What should an employer do about current employees employed less than two years? What consideration should be offered new employees? How far is the reach of this decision? A conversation with a legal professional may be in order.