In late 2011, the Illinois Supreme Court decided the Reliable Fire case, and upended long-standing case law surrounding the enforcement of restrictive covenants in Illinois. In particular, while the Court reaffirmed that restrictive covenants, including noncompete agreements, are enforceable, and that they must be reasonable, meaning that they must be tied to a legitimate business interest of the employer. However, the Court rejected that the legitimate business interest must be tied to a) confidential information, or b) near permanent customer relationships of the employer. Rather, the Court embraced a “totality of the circumstances” test. The language of the case makes clear that the limitations placed on an employee can be no greater than that which is necessary to protect the legitimate business interest of the employer.
The Reliable Fire case posed a lot of new questions. If a legitimate business interest could encompass more than confidential information or near permanent customer relationships of the employer, what kinds of employees would be subject to a non-compete, and how far would courts go to enforce those non-competes?
Saddler’s Row v. Dainton, helped to answer both of those questions. In particular, in this case, the 2nd District Appellate Court determined that a non-compete could be enforced against a Master Saddler to prevent him from working for a close by competitor based solely on his access to the customers of Saddler’s Row. This determination was made even though Mr. Dainton did not acquire his “Master Saddler” through Saddler’s Row or at their expense. Further, this decision was made was despite the trial court determining that the agreement was overreaching in claiming a 75 mile geographic radius from the employer. Saddler’s Row will undoubtedly be cited by many employers in the future seeking to enforce restrictive covenant’s against other professionals, much as the Total Health Physicians case is presently cited. It will also be cited as an example of an appellate court requiring a trial court to apply a “blue pencil” to modify an overbroad restrictive covenant.
Similarly, several cases illustrated that traditional defenses to non-competes are alive and well. For example, Fisher/Unitech v. Computer Aided Technology demonstrated that generalized knowledge and experience acquired through employment – even if it was acquired solely through contact with the employer – cannot comprise confidential information sufficient to enforce a non-compete.