Illinois Appellate Court Finds Insufficient Consideration Where Employer Relied On Under Two Years Employment In Support Of Noncompetition And Nonsolicitation Agreements

On June 24, 2013, the Illinois Appellate Court for the First District (encompassing Cook County and Chicago) decided Fifield v. Premier Dealer Services, Inc., Case No. 1-12-0327 (June 24, 2013). The court found that Premier Dealer Services' (Premier) offer of at-will employment at the onset of the plaintiff's employment constituted insufficient consideration to support nonsolicitation and noncompetition provisions contained in his employment contract, but it would have constituted adequate consideration if his employment had continued for two years. The court relied on prior authority, which held that when a current employee signs a restrictive covenant and receives nothing more than continued at-will employment in return, this only constitutes adequate consideration if the employment ultimately continues for a significant period.

Facts of the Case

The plaintiff was a long-standing employee of a Great American Insurance Company subsidiary, which marketed finance and insurance products to the automotive industry. In October of 2009, Great American sold the subsidiary to Premier, a separate and distinct company that developed, marketed and administered a variety of after-market automotive products and programs. As a result, Great American informed the plaintiff that his employment would end as of October 31, 2009. Premier offered the plaintiff employment late in October 2009, but required him to execute its "Employee Confidentiality and Inventions Agreement" that included two-year noncompetition and nonsolicitation covenants.

Three and a half months later, he resigned from Premier and began working for a competitor. The plaintiff and his new employer then filed a complaint in the Circuit Court of Cook County for declaratory relief that the noncompetition and nonsolicitation provisions in the agreement were invalid and unenforceable. Premier countersued for injunctive relief, seeking to enforce the noncompete provision. The plaintiff's main argument was that the restrictive covenants were not supported by adequate legal consideration because he only worked for Premier for three and a half months. In response, Premier argued that the consideration was his employment itself, because he had been terminated by Great American and re-hired by Premier. The circuit court sided with the plaintiff and his new employer and invalidated the restrictive covenants for lack of consideration. The appellate court affirmed.

Legal Standards

Illinois courts have...