Covenant found unenforceable. Employers Non-Compete Covenant was not supported
by Adequate Consideration where employment period did not exceed two years.

is not uncommon for employers and employees to enter into employment agreements
containing a restrictive covenant. 
Typical restrictive covenants include confidentiality agreements,
non-solicitation agreements, and agreements not to compete. Unfortunately, all
too often these agreements fail to set forth separate and specific
consideration for the restrictive covenant provisions.  Instead they rely upon a general recitation
that the promise to employ is the consideration given for all of the promises
or agreements extended by the employee. 
Employers need to be mindful that a restrictive covenant must be
supported by consideration in order to be enforceable.  In the context of an employment agreement, the
promise to employ – by itself – may be insufficient.

case of Fifield v. Premier Dealer
Services, 2013 IL App (1st) 120327, is
enlightening on this topic.  The Fifield
decision is a ruling by the Illinois Appellate Court, First District.  Justice
Cunningham, with concurring opinions from Justice Hoffman and Delort, followed
the Illinois rule that there must be at least two years or more of continued employment
to constitute adequate consideration in support of a restrictive covenant.  The facts of the case are reasonably straight
forward.  In their simplified form, Fifield
was employed by Great American Insurance Company (Great American) and assigned
to work exclusively for Premier Dealership Services (PDS). PDS was purchased by
Premier. Following the purchase of the business, Premier made an offer of
employment to Fifield conditioned on his agreement to sign an “Employee
Confidentiality and Inventions Agreement” which included nonsolicitation and
noncompetition provisions. Under the agreement, Fifield was prohibited, for a
period of two years from his termination, from directly or indirectly competing
with his employer.  Specifically, he was
prohibited from soliciting customers, prohibited from interfering with the
Employer’s customer relations, and prohibited from accepting business from
customers which Fifield has contact with through the Employer.  Fifield negotiated the inclusion of an
additional provision which stated that the nonsolicitation and noncompetition
provisions would not apply if Fifield was terminated without cause during the
first year of his employment. Fifield signed the agreement on October 30, 2009,
began his employment on November 1, 2009, and ultimately resigned his position
on February 12, 2010.  Thereafter, he
went to work for one of Premier’s customers. 

dispute was presented to the trial court through a complaint for declaratory
judgment.  This is an action where the
court is asked to determine the rights and liabilities of parties locked in a
dispute.  In this way, the court is able
to state the rights and liabilities of parties under the terms of an agreement.

restrictive covenants are carefully scrutinized by Illinois courts because they
operate as partial restrictions on trade. Cambridge
Engineering, Inc. v. Mercury Partners 90 BI, Inc.
, 378 Ill. App. 3d 437,
447 (2007).  In order for a restrictive
covenant to be valid and enforceable, the terms of the covenant must be
reasonable. Id.  However, before even considering whether a
restrictive covenant is reasonable, the court must make two determinations: (1)
whether the restrictive covenant is ancillary to a valid contract; and (2)
whether the restrictive covenant is supported by adequate consideration. Lawrence & Allen, Inc. v. Cambridge
Human Resource Group, Inc.
, 292 Ill. App. 3d 131, 137 (1997). The only
issue before this court in this case is whether there was adequate
consideration to support the restrictive covenants in the agreement. Under
Illinois law, continued employment for a substantial period of time beyond the
threat of discharge is sufficient consideration to support a restrictive
covenant in an employment agreement. Brown
& Brown, Inc. v. Mudron
, 379 Ill. App. 3d 724, 728 (2008). Illinois
courts analyze the adequacy of consideration in the context of postemployment
restrictive covenants because it has been recognized that a promise of
continued employment may be an illusory benefit where the employment is
at-will. Id. Generally, Illinois
courts have held that continued employment for two years or more constitutes
adequate consideration. Id. The
restrictive covenant will not be enforced unless there is adequate
consideration given.     

resigned his employment approximately three months after he started with
Premier.  Because Fifield’s post contract
employment was substantially less than two years, the court found that the
restrictive covenant was not supported by consideration and could not be
enforced.  This rule is maintained even
if the employee resigns on his own instead of being terminated.  Diederich,
2011 IL App (5th) 100048;  Brown, 379 Ill. App. 3d at 729.  Without the requisite two years of at-will
employment, the covenant was not supported by adequate consideration under
Illinois law.

Cunningham followed and clarified Illinois’ standing rule that relatively short
periods of at-will employment do not constitute adequate consideration for the
purpose of enforcing restrictive covenants contained in those employment
agreements.  Employers are admonished to
pay separate and distinct consideration for their restrictive covenants or be
subject to losing the value of the covenant if the employment relationship does
not last for a period exceeding two years. 
Bryan Bagdady is a business trial attorney with over thirty years of litigation
experience. He has experience in litigating complex business disputes,
intellectual property ownership disputes, non-compete agreements, and many
different types of business and commercial litigation disputes including
lawsuits between businesses or between shareholders and owners of the same
business.  You can contact Bryan by calling (630) 778-9600 or by email at  You can also contact him online here.