Employers in competitive markets often require their employees to sign employment contracts with non-compete covenants. In general, these covenants prohibit the employee from accepting a similar job with a competitor for a period of time after they leave their job with their current employer. The intended purpose of these covenants is to protect employers from competitors who might gain an unfair advantage by luring away valuable employees. However, a non-compete covenant is invalid if it imposes unreasonable restrictions on a former employee.
If an employee signs a contract with a non-compete covenant, and then accepts a similar job with a competitor during the prohibited time period, the former employer will often sue both the former employee and his or her new employer. For example, in Cambridge Engineering Inc. v. Mercury Partners 90 BI, Inc., 378 Ill. App. 3d 437 (1st Dist. 2007), and in a related case filed in Missouri, Cambridge Engineering Inc. sued its former employee, Gregory Deger, and his new employer, Brucker Company, a competitor of Cambridge in the residential and business heating market.
Degar worked at Cambridge as a sales representative starting in 1996, and signed a contract including a non-compete covenant. The covenant restricted him from competing in any way with Cambridge, or soliciting its employees or customers, anywhere in the United States or Canada, for 24 months after leaving. Cambridge terminated Deger in 2001 and he was hired by Brucker about a month later as an inside support person rather than a salesperson. Nonetheless, he admitted to using customer contacts developed at Cambridge. Cambridge sued Deger, but not Brucker, in St. Louis and was granted a permanent injunction, which prohibited Deger from performing certain sales-related work for Brucker.
Cambridge then sued Brucker in Illinois for compensatory and punitive damages and for tortious interference with the contract. At trial, the president of Cambridge testified that the company believed the contract would prevent Degar from holding any job, even a janitorial position, with any competitor, including areas where Cambridge does not do business. The jury found for Cambridge in the amount of $50,000. Notwithstanding the jury’s verdict, the trial court ruled in favor of Brucker on the basis that the non-compete clause was overly broad and unenforceable. Cambridge appealed.
The Appellate Court found that the non-compete covenant was unenforceable. First, the geographic scope was unreasonable, the court wrote, because it restricted Degar from taking a job with a competitor anywhere in Canada even though Cambridge only had a small amount of business in Canada. This restriction did nothing to protect Cambridge from competitors gaining an unfair advantage at its expense, the court wrote.
The Appellate Court also found that the non-compete covenant was overbroad because it prohibited Degar from “engage[ing] in any activity for or on behalf of Employer’s competitors,” a phrase that could theoretically bar Degar from taking a job filing papers for a competitor.
Furthermore, testimony from Cambridge’s president at trial confirmed this interpretation; he “agreed with counsel’s contention that the St. Louis action was brought to prevent Degar from working for a competitor in any capacity.” Thus, the clause was overly broad, unreasonable, and unenforceable under Illinois law.
The attorneys at DeBlasio Law Group are experienced in representing both employers and employees involved in litigation over non-compete agreements. We can also review such covenants to determine their enforceability. Visit our website for more information at DeBlasioLawGroup.com.