The saga of “What consideration is adequate?” in Illinois continues. What has become clear is that federal courts are more forgiving than Illinois state courts on this issue.
On March 10, 2016, Judge Gettleman of the federal court in Chicago issued a ruling on this issue in R.J. O’Brien & Associates, LLC v. Williamson, Case No. 14 C 2715. In this case, defendant Williamson signed two agreements when he was hired in 2012 in which he promised that, for a period of time after his employment with plaintiff R.J. O’Brien & Associates (“R.J.”) ended, he would not solicit R.J.’s employees or customers. One year later, Williamson quit abruptly and, within a week, was soliciting his former colleagues, with the hope that they would bring their business with them to R.J. One of them did just that.
R.J. sued Williamson for damages—not for injunctive relief—for its loss of the employee he solicited and who took her customer accounts to Williamson’s new employer. Williamson ultimately moved for summary judgment, claiming that because Williamson had not been employed for two years after he signed the agreement (he quit after one year) there was inadequate consideration for the restrictions and, therefore, they were invalid. In asserting this argument, he relied on the now (in?)famous 2013 decision by the Illinois Appellate Court in Fifield v. Premier Dealer Services, Inc., and subsequent Illinois state court decisions following Fifield. The court in Fifield held that, absent additional consideration (i.e., more than hiring the person or simply allowing them to stay employed), a restrictive covenant agreement would not be enforceable unless the employer employed the individual for at least two years after signing the restrictive covenant agreement.
This argument was not the silver bullet Williamson likely thought it would be. R.J. brought its lawsuit in federal court, not state court. And in the federal courts in Illinois, prior to R.J.’s filing of its suit against Williamson, four of the five federal court cases involving Fifield’s supposed “bright-line” rule of two years’ continued employment rejected that rule and, instead, favored a case-by-case analysis of all factors bearing on the issue of consideration (such as compensation, termination-related terms, etc.). Judge Gettleman, in R.J. O’Brien & Associates, became the fifth federal judge to reject the two-years’ employment bright-line rule. Judge Gettleman also noted that he was influenced by the fact that Williamson had voluntarily resigned (this was of no moment to the Illinois court in Fifield, remember); R.J. had honored its obligations to Williamson during his employment; and R.J. had taken measures that benefited Williamson and which could have put R.J. at risk of liability should Williamson violate certain rules regulating R.J.’s business—all of which reflected adequate consideration for the restrictive covenants.
The R.J. O’Brien & Associates decision, when added to the prior four federal court decisions rejecting Fifield’s bright-line rule, has a simple statement to make to employers in Illinois: If an employee departs in less than two years after signing a restrictive covenant agreement, the employer should seek to enforce that agreement in federal court, if federal jurisdiction can be attained.