Understanding Non-Compete Agreements in Chicago
It’s no secret that Chicago, Illinois is a major business hub in the Midwest and throughout the United States3 min read
It’s no secret that Chicago, Illinois is a major business hub in the Midwest and throughout the United States. Businesses of all shapes and sizes flock to the Windy City to take advantage of its bustling market, but savvy owners know that protecting their goods and resources is essential. That’s why many companies in the city enter into non-compete agreements with their employees.
What is a non-compete agreement? Simply put, a non-compete agreement (often referred to as a “restrictive covenant”) is a legal document between an employer and employee. That document outlines certain restrictions on either party after their employment comes to an end. Generally speaking, the agreement is put in place to protect the employer’s trade secrets, confidential information, and other sensitive data.
Bringing in experienced legal counsel is paramount when broaching the subject of a non-compete agreement. Companies and employees should both be aware of the laws the agreement is subject to, both state and federal. And in the case of non-compete agreements in Chicago, both parties should recognize the nuances of the local laws.
Chicago’s Take on Non-Compete Agreements
As a major metropolitan hub, non-compete agreements in Chicago have been held to a high standard and judged sternly and harshly by the legal system. The Illinois Supreme Court has declared all non-compete agreements to be “contrary to public policy” and has provided that “every reasonable effort be made to limit the scope and duration of the restriction.”
Although the law on non-compete agreements in Illinois is very restrictive, certain non-compete agreements have been upheld by the courts. In order for a non-compete agreement to be deemed valid, it must pass the following four criteria:
• The non-compete must protect a legitimate business interest of the employer
• The non-compete must be reasonable in terms of scope and duration
• The case must have been*undertaken in a reasonable manner
• The non-compete must not be damaging to the state’s economy
In addition to these criteria, the courts also maintain some ambiguity in regards to what defines a “legitimate business interest.” Generally speaking, the business interest must relate to a trade secret, confidential information, or an employer’s “good will.” This usually has to do with the protection of a customer base or the prevention of the unauthorized use of an employer’s proprietary information.
When it comes to the enforceability of non-competes in Chicago, the extent to which a non-compete is deemed reasonable will be decided in court. However, in general, reasonable duration is considered to be approximately two years or less, and reasonable scope usually includes only the area of the employer’s actual business interests.
Advice on Non-Compete Agreements
Regardless of the laws in any given state, non-compete agreements are a massive investment of both time and money. Consequently, just as much thought should be given to a non-compete arrangement as to any other part of a business arrangement. Many business owners make a habit of creating a non-compete arrangement without taking the time to understand the full implications. This is very dangerous, as it can often result in the entire agreement being deemed invalid.
Consequently, many savvy business owners in Chicago opt to bring employees on for a trial before actually implementing a non-compete agreement. This helps foster a more positive working relationship as well as builds confidence in the employer’s understanding of the employee’s capabilities.
Just as important as bringing on the right employee for a business is finding the right attorney to handle non-compete agreements. It’s critical to work with an attorney that is knowledgeable in the laws of a given state. UpCounsel has a wide network of experienced lawyers from across the United States to help ensure that non-compete agreements are crafted to the highest legal standard.
The decision to enter into a non-compete agreement should never be taken lightly, particularly one in the city of Chicago. To ensure that that the agreement is created correctly, please visit UpCounsel’s network of experienced attorneys to start the process of finding the right attorney for your business.