Heads up, Illinois employers with post-employment restrictive covenants:  three new cases may impact your enforcement efforts. One continues the split between state and federal courts as to whether continued employment is sufficient consideration, another demonstrates the strict scrutiny courts can place on employers’ stated legitimate business interests, and a third makes clear that attorneys’ fees need not bear a rational relationship to damages awarded. Here are the details:

Another Federal Blow to the Two-Year Rule

 In Airgas USA LLC v. Adams,  Judge Reinhard of the Northern District of Illinois rejected the two-year rule set forth in Fifield v. Premier Dealer Services, a 2013 Illinois Appellate Court case, which held that there must be at least two years of continued employment to provide adequate consideration for a restrictive covenant.  Instead, Airgas held that employment for less than two years was sufficient consideration for a non-compete, a finding in line with those of other Illinois federal judges, including Judges Castillo, Shah, Leinenweber and Gettleman of the Eastern District, and Judge McDade of the Central District.  The result?  Enforcing non-competes, where the employee in question was employed less than two years following the agreement, can increasingly depend on whether you’re in state or federal court.  Illinois employers in such a position may be well served by ascertaining what claims, if any, they may have under federal laws which confer original federal question jurisdiction, like the recent Federal Defend Trade Secrets Act.

Legitimate Business Interests Narrowed, Staffing Services

In ATC v. RCM Technologies, the court held that a third-party staffing company, which outsourced nurses to the Chicago Public Schools, did not have a legitimate business interest in preventing its nurse employees from going to work for another nurse-staffing company.  The court reasoned that ATC did not have near-permanent customer relationships with its customers such as the Chicago Public Schools, which, to the contrary, routinely sent out RFPs to other nurse-staffing agencies.  The court further reasoned that the nurses themselves did not possess any confidential information, and were not in a position to compete with ATC because they provided nursing services, not nurse staffing services.

While ATC‘s holding is specific to staffing companies, its application to all employers is clear: courts’ assessment of legitimate business interests involves multiple factors, including whether or not clients have the ability to terminate their relationships with the employer at any time for any reason (which, in this case, Chicago Public Schools did).

Doctor Covenants Upheld, Large Attorney Fee Award Upheld for Small Damages

In the unpublished decision of Mohanty v. St. John Heart Clinican Illinois appellate court upheld a judgment after trial enforcing three- and five-mile restrictive covenants against two doctors for three and five years, respectively.  While the jury awarded only $31,000 in damages for violation of the restrictive covenants, the trial court awarded $1.36 million in attorneys’ fees and costs pursuant to a fee-shifting provision in the non-compete agreements.  Despite the large disparity between that award and the jury’s damages, the appellate court affirmed the finding noting, for example, the extensive litigation pursued to get the matter to trial.

Mohanty, while a “win” for employers, confirms that Illinois courts often will award attorneys’ fees greatly out of proportion to the final result where the courts believe that one side was justified in its position and the other side insisted upon lengthy litigation.