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One of the most valuable assets of a business is its employees, and their unique skills and relationships with the customers. A business develops its reputation through the actions of its employees. Because of this, employees are often asked to sign non-competition covenants (called “non-competes”).

Non-competes are contract provisions which generally prevent an employee from working for or performing certain activities for a competitor of the former employer for a set period of time, and within a certain geographic area. They are designed to protect the employer from the former employee using the knowledge and relationships gained through the employment, to unfairly compete with the employer.

Although Illinois allows non-competes, they are scrutinized carefully to ensure they are necessary and reasonable restraints in light of all the facts. So it is crucial in deciding whether to sign a non-compete, that you have your attorney examine all the facts to determine whether what is being asked of you would be allowed by Illinois law. It is prudent to be sure at the outset that the non-compete is warranted and acceptable. In other words, not every one of these agreements is enforceable.

At the outset, it has to be decided if the non-compete is necessary. Not all employer-employee relationships call for such a restriction; the employer should have a legitimate interest to protect, and the employee’s work should directly relate to that interest. This kind of legitimate interest has been found in Illinois in two scenarios in particular: first, where the employer has confidential information that has been cultivated over time and maintained as secret; and second, where there are significant customer relationships that have taken considerable time and resources to develop. The employee’s role with the company should relate directly to that interest.

Also, your employer cannot just demand for you to be restricted without some exchange of value. The non-compete can be part of an employment agreement, or it can be requested in exchange for some other tangible benefit, such as a change in status, employment term, or stock.

The next determination to be made in evaluating a non-compete in Illinois is whether the restrictions are reasonable in time, geography, and activity. Each of these factors should be tailored specifically to protect the employer’s interest, and no more.

Regarding time, look for a nexus between the amount of time needed to develop the interest of the business, and the amount of time in the non-compete period. One-year and two-year restrictions have been upheld where it took about that long to fully develop the customer relationships. While there is no guarantee that a longer non-compete would be ruled invalid, it typically is.

Similarly, the restricted geographic area should be no more than where the employer conducted business, and where the employee had involvement. In one Illinois case, a 100 mile radius was found reasonable, where it involved a radio personality and the radius represented the station’s coverage area. It protected the employer from losing listeners to a competing station.

In some circumstances, though, where the employee’s job entailed forming significant customer relationships nationwide, it won’t necessarily matter if there is no geographic limitation. We can see this scenario with internet businesses, where employees are more frequently sitting, for example, in Chicago and forming strong customer relationships from coast to coast.

Additionally, if the restricted activities are more broad than necessary, the non-compete will likely be unreasonable. Illinois courts have upheld non-competes that limit particular competitive activities after the employee leaves, like solicitation of customers and other employees. But non-competes that have a blanket prohibition on activities that compete with the employer have been held unreasonable.

All these factors are looked at together to determine whether the non-compete is reasonable. In Illinois, the employer’s interests have protection, but judges also do not want to see the employee suffer unnecessary harm to the ability to practice his or her chosen occupation. That’s why even a 10-mile restriction can be too much, where in the kind of business involved, it would preclude the employee from future work.

Because the non-compete agreements can restrict your ability to work after you lose or leave your job, it is essential to have an attorney fully consider all of the facts of your situation in light of all of these factors, to determine whether and what you should agree to. If you decide later that you believe that the non-compete is unreasonably restrictive and you breach the agreement, it could be quite costly. Your former employer can try to get an injunction where the court will order you to honor the agreement. Also the employer can sue you for money damages to compensate for lost profits, and potential loss of future business.

In defending a suit alleging that you breached the non-compete, you can argue that the agreement was unreasonable, however these issues are complicated and costly to defend. And if the agreement was not too unreasonable or unspecific, Illinois law allows judges to change some of the restrictions to make them reasonable, rather than throwing out the whole agreement.

While a non-compete may seem like a good idea in exchange for an employment benefit, great care should be taken in advance to be sure you are not regretting your decision down the road. The best way to do that is to have an experienced attorney in your corner. Most lawyers we recommend will charge a small flat fee to review these agreements and offer their opinion. If you would like a recommendation or just have general questions please contact us at any time.