For a non-compete to be valid it must meet the three basic requirements of an ordinary contract: offer, acceptance and consideration. Consideration is a legal term that essentially boils down to whether the parties have agreed to exchange something within the contract terms. When you purchase a gallon of milk, you are agreeing to pay the store for the milk in exchange for the store giving you the gallon of milk. Your money and the milk are the consideration.
When an employee has already been working at a job and the employer suddenly requires the employee to sign a non-compete agreement, what is the employer’s consideration? What is it giving the employee? Since employment in Illinois is at-will and the employer can fire the employee without a reason and as a result not firing the employee (i.e. continued employment) may be consideration. The problem is that because employment is at-will, the employer could fire the employee the following day. Illinois law recognizes that this is not fair consideration and for years Illinois Courts have insisted that continued employment be for some minimum length of time to be valid consideration.
On December 11, 2014 a Court confirmed that in Illinois for continued employment to support a valid non-compete the employee must work for at least two (2) years. This decision follows on the footsteps of a June 2013 appellate court decision that also required at least two years of employment. The June 2013 decision was tacitly affirmed by the Illinois Supreme Court when it declined to review the case.
Why is this important?
- Employees that have been forced to sign a non-compete without receiving anything in exchange for doing so may be able to void the non-compete entirely if they have not worked for at least two more years.
- Employers that require its employees to sign non-compete agreements should provide an additional benefit beyond continued employment when requiring employees to sign a non-compete.
Because the standard for consideration is quite low – courts often do not inquire whether the consideration is adequate, but only that it exists – this is a very easy standard to meet. Nevertheless employers often fail to provide other consideration risking the validity of the non-compete.
If you have signed a non-compete or are concerned about whether a non-compete is valid you should consider having it reviewed by one of our Chicago Non-Compete attorneys at Maduff & Maduff. Contact us for any of your legal concerns today.