Totality of Circumstances

The law on restrictive covenants is rarely cut-and-dry, often unpredictable, and always fluid. Given the flux of the law, our Chicago restrictive covenants law lawyers understand that the outcome of any given restrictive covenant case is dependent in large part on the quality of advocacy.

In 2011, the Illinois Supreme Court had an opportunity to add clarity to this area of law and guide lower courts tasked with deciding the enforceability of restrictive covenant cases in the future. Unfortunately, the Court’s express adoption of the “totality of circumstances” test in Reliable Fire Equipment Co. v. Arredondo, 2011 IL 111871, did not clarify Illinois law on this matter but rather injected even more uncertainty. For decades Illinois appellate courts had grappled with the question of what constituted a “legitimate business interest.” It was clear that to be enforceable a restrictive covenant must be necessary to protect an employer’s legitimate business interest.

Over the years, Illinois appellate courts had generally reached a consensus that Illinois law recognized only two protectable interests: (1) “near permanent” customer relationships; and (2) confidential information. In Arredondo, the Illinois Supreme Court rejected the notion that the two protectable interests identified by so many appellate courts was exhaustive. Instead, the court expressly adopted the “totality of circumstances” test for determining if a legitimate business interest existed. The totality of circumstances test is largely based on equitable principles of reasonableness. The Arredondo court’s holding acted to overturn decades of Illinois appellate precedent defining legitimate business interests and erased what clarity the appellate courts had created.

The totality of circumstances test requires extensive review of the unique circumstances surrounding a case in order to determine if a legitimate business interest exists. Our restrictive covenants law attorneys can help Chicago clients with this review. Near permanent customer relationships and confidential information are now only two of any possible number of protectable interests. What does this mean for future restrictive covenant cases? It means that once again quality of advocacy will heavily determine the outcome of a suit. For the employer seeking to enforce its non-compete or non-solicitation agreements, this means convincing a court that when considering the totality of circumstances a legitimate business interest exists—even in the absence of near permanent customers or confidential information. For an employee, this means convincing the court that even given the virtually unlimited protectable interests that could exist none do. Admittedly, this can create an uphill battle for an employee. The good news is that there is little evidence that trial courts have drastically changed their rulings or begun ruling disproportionately in favor of either employers or employees.

One thing is clear in the wake of Arredondo, it is essential in any dispute involving restrictive covenants that a party has an experienced lawyer capable of combining traditional Illinois standards with a fact-intensive analysis of the particular circumstances of the case. The Chicago restrictive covenants law attorneys at Lubin Austermuehle, P.C. have decades of experience in all facets of restrictive covenant law from drafting employment agreements, to negotiating the terms of specific covenants, to litigating disputes over the enforceability of restrictive covenants. If you have an issue or a dispute involving a restrictive covenant, give our restrictive covenants law lawyers, located in the Chicago area, a call today at 630-333-0333 or contact us online.