Cracks in the Fifield Armor?: New Dissent Marks First big Challenge to Illinois' Bright-Line Restrictive Covenant Rule

When continued employment is the sole consideration for a post-employment restrictive covenant (such as a noncompetition agreement), the Illinois Supreme Court requires that an employee be continually employed for a substantial period of time. Generally, a period of two-years is an adequately substantial period.  A strong dissent in a new Illinois opinion suggests that not all judges are on board with the bright-line rule recently endorsed by several Illinois courts.

Two opinions from the First and Third Illinois appellate districts since 2013 have held that the two-year time-frame constitutes a bright-line requirement. Fifield  v. Premier Services and Prairie Rheumatology Associates v. S.C. Francis held that there must be at least two years of continued employment for a restrictive covenant to be valid, absent some other additional consideration such as a signing bonus or added vacation days. However, the issue does not appear to be settled. For instance, the Illinois Supreme Court declined to hear Fifield on appeal. Additionally, absent an Illinois Supreme Court ruling, three of four federal courts applying Illinois law in this area have made predictive judgments of how they believe the Illinois Supreme Court would rule, and have declined to follow the bright-line, 2-year minimum.

McInnis

McInnis v. OAG Motorcycle Ventures, 2015 IL App (1st) 130097, adds a new twist to this unsettled area of law. In McInnis, the First District applied Fifield and the bright-line test by holding that 18 months of continued employment is not sufficient consideration for a post-employment restrictive covenant. However, for the first time since Fifield, McInnis also featured a detailed dissent that advocated for a case-by-case analysis instead of the bright-line two-year test.

In McInnis, a top-selling motorcycle salesman worked for OAG Motorcycle Ventures for three years. He left his employment with OAG for one day to work for a competitor, and—presumably finding his prior employer more to his liking—asked OAG if he could return. OAG agreed but required McInnis to sign a non-competition and confidentiality agreement as a condition of his return to employment with OAG. Upon his return, McInnis was not required to undergo a trial period prior to receipt of benefits like other new employees. Otherwise, McInnis was a new employee. McInnis signed the agreement, but he left OAG after 18 months and returned to the employ of the competitor.

OAG sued for an injunction. The trial court applied Fifield and found that the restrictive covenant lacked adequate consideration because McInnis only worked for OAG for 18 months. The appellate court upheld this determination. The appellate court also considered, and concurred with, the trial court's hearing to determine the existence and adequacy of any additional consideration, ultimately finding no additional consideration.

Dissent

Justice David Ellis dissented. In his dissent, Justice Ellis not only advocated for a fact-specific case-by-case analysis, rather than the bright-line test, but he also laid out a detailed argument that a bright-line test was a misinterpretation of earlier cases. He evaluated those prior decisions, writing that the cases upon which Fifield relied did not make a determination of a minimum amount of time necessary to be a substantial period of time: "saying that courts have generally found two years of postcovenant employment to be sufficient is very different than saying that anything less than two years is automatically insufficient."

Justice Ellis also dissented from the majority's review of whether additional consideration existed, stating that it was nonsensical to look for additional consideration for a newly hired employee, because the baseline for determining what was "additional" was no job, salary, or benefits.

Significantly, Justice Ellis also advocated for a case-by-case analysis of whether the employee left on his own volition or whether the employer terminated the employment. Currently, First and Third District case law holds that it is irrelevant whether the employee resigns or is fired. However, Justice Ellis argued that this determination also results from a misinterpretation of one earlier case, where an employer reneged on its obligations under a restrictive covenant after seven months and the employee quit. While the employee quitting may have been irrelevant in that particular case, Justice Ellis wrote that it did not stand for the proposition that the circumstances of the termination of employment are always irrelevant. Justice Ellis expressed concern that the courts, in an attempt to ensure employers cannot bind employees to restrictive covenants and then immediately terminate them, instead left employers at the whim of employees, who can leave their jobs unencumbered by a restrictive covenant so long as they leave before two years. He argued that the result is restrictive covenants being illusory for Illinois employers.

Justice Ellis closes by stating that he would have found McInnis' 18 months of continued employment to be an adequate consideration, and he would have remanded the case for determination of whether the terms of the covenant were reasonable.

Conclusion

The adequacy of consideration for post-employment restrictive covenants in Illinois remains in flux, and it is vitally important to ensure that these provisions are vetted by an experienced employment law attorney.