Preparing for Non-Compete Litigation

Non-compete litigation can be fast-paced and expensive. When an employer learns that a current or former employee is violating his or her non-compete agreement (also known as a non-competition agreement or non-compete), it must act quickly to prevent or mitigate the harm to the business. Suspicion and rumor, however, are not sufficient to initiate legal action. An employer must confirm suspicions and gather sufficient factual support to have a hope of obtaining a temporary restraining order or preliminary injunction. It is important to consult an experienced non-compete attorney as early in the process as possible. An experienced non-compete attorney will be able to assist in assessing the enforceability of the non-competition agreement, investigating the existence of a violation, gathering necessary evidence, initiating emergency litigation, and presenting the evidence and testimony at a hearing.

An employer’s case is only as good as the non-compete agreement it is seeking to enforce. One important issue to consider when assessing whether a non-compete agreement is enforceable is whether it is supported by sufficient consideration. Illinois courts require a minimum employment period of two years for continued employment to be considered adequate consideration, although not all federal courts in Illinois have followed this requirement. Importantly, the two years of continued employment requirement applies only when the continued employment was the sole consideration for the non-compete agreement.

Even if the employer has identified the necessary consideration for the agreement not to compete, employers must carefully review the language of all agreements signed by the employee containing restrictive covenants (e.g. non-solicitation agreements, non-poaching agreements, non-disclosure agreements). An employer must be certain that the non-compete agreement is still in effect and has not expired or been superseded by another agreement. Most non-competes only operate for a specified period of time (e.g. one year) following the end of the employment. However, some non-competes include a tolling provision, which extends the time for enforcement for any period in which the employee is in breach of the restrictive covenant.

Next, an employer must determine whether the provisions of the non-compete agreement actually prohibit the employee’s conduct. The employee may be doing something undesirable or that is competitive with the employer but it does not automatically follow that the conduct violates the non-compete agreement or falls within the scope of activities prohibited in the non-compete. Having the assistance of a non-compete attorney can be invaluable in determining what conduct is prohibited by the language of the non-compete agreement.

To present a good case at any emergency litigation, such as a TRO hearing, an employer will need to gather all relevant documents. Some documents that an employer might need to collect include the employee’s offer letter, employment contract, non-competition agreement (if it was a stand-alone document), employment file, and any separation agreement. Best practice for employers is to retain all agreements containing post-employment restrictive covenants, even those no longer in effect, because they may still be useful. For example, an employer that updates its non-compete agreement regularly and requires employees to sign the updated agreements can use its business practice as evidence that it has a legitimate business interest in enforcing non-competes.

It is important for the employer to act quickly when it learns of a suspected violation of its non-compete agreements or other restrictive covenants. The need for swift action has a number of benefits including demonstrating that the employer has a legitimate business interest and takes enforcement of its non-compete agreements seriously. To evaluate whether an employer has a legitimate business interest, courts often take into account how quickly the employer acted after learning of the violation. Illinois courts routinely find that employers who drag their feet in seeking an injunction forfeit their right to such relief. The courts reason that the business must not be at risk of suffering irreparable harm or else the employer would have acted faster. Taking swift action also can help to minimize damage to the employer’s business and ensure that any potential evidence of the employee’s conduct will not be lost.

Super Lawyers named Illinois commercial law trial attorney Peter Lubin a Super Lawyer and Illinois business dispute attorney Patrick Austermuehle a Rising Star in the Categories of Class Action, Business Litigation, and Consumer Rights Litigation. Lubin Austermuehle’s Illinois business trial lawyers have over thirty years of experience in litigating complex class action, copyright, noncompete agreement, trademark and libel suits, consumer rights and many different types of business and commercial litigation disputes. Our Naperville and Hinsdale business dispute and restrictive covenant lawyers, civil litigation lawyers and copyright attorneys handle emergency business lawsuits involving copyrights, trademarks, injunctions, and TROS, covenant not to compete, franchise, distributor and dealer wrongful termination and trade secret lawsuits and many different kinds of business disputes involving shareholders, partnerships, closely held businesses and employee breaches of fiduciary duty. We also assist Chicago, Cook, and DuPage County area businesses and business owners who are victims of fraud. You can contact us by calling 630-333-0333. You can also contact us online here.