Illinois is one of several jurisdictions that recognizes the authority of courts to blue pencil or judicially modify otherwise unenforceable restrictive covenants to be enforceable. See, e.g. Weitekamp v. Lane, 250 Ill. App. 3d 1017, 1028, 620 N.E.2d 454, 462 (4th Dist. 1993) (affirming judicial modification of 300-mile non-compete to specific county); Arpac Corp. v. Murray, 226 Ill. App. 3d 65, 80, 589 N.E.2d 640, 652 (1st Dist. 1992) (affirming the circuit court’s modification of restrictive covenant when it was modified “only slightly” and holding that the balance of the restrictions were reasonable and necessary to protect Arpac’s legitimate business interests).
Recent reported decisions, however, cast doubt on the availability of judicial modification in all but exceedingly limited circumstances. In the past three years, only a handful of cases even mentioned judicial modification and, of those cases, not one actually modified, or affirmed the modification of, an otherwise unenforceable covenant. See AssuredPartners, Inc. v. Schmitt, 2015 IL App (1st) 141863, ¶ 52 (2015) (refusing to modify restrictive covenants because “deficiencies too great to permit modification”); Bankers Life & Cas. Co. v. Miller, No. 14 CV 3165, 2015 WL 515965, at *3 (N.D. Ill. Feb. 6, 2015) (deciding choice of law, noting that “Illinois courts are circumspect in their modification” and that “Illinois courts look skeptically at modifications, and may modify covenants only after ensuring that fairness is not harmed”); Fleetwood Packaging v. Hein, No. 14 C 9670, 2014 WL 7146439, at *9 n.7 (N.D. Ill. Dec. 15, 2014) (rejecting a proposed modification that would a create a durational limitation where none existed before, noting that “[e]ven when courts have found judicial reformation to be warranted, the challenged restrictive covenants needed only slight modification to become reasonable”).
The current trend is largely based on the public policy considerations articulated in Cambridge Engineering, Inc. v. Mercury Partners 90 BI, Inc., in which the First Appellate District, in dicta, refused to modify otherwise unenforceable restrictive covenants because it would encourage employers to draft overly broad restrictive covenants:
Such reformation, if permitted by courts, would give employers an incentive to draft restrictive covenants as broadly as possible, since the courts would automatically amend and enforce them to the extent that they were reasonable in the particular circumstances of each case. This could have a severe chilling effect on employee posttermination activities; an employee unschooled in the law cannot be expected to know to what extent such a covenant is enforceable, particularly since courts apply a multifactor reasonableness standard instead of a bright-line rule. Thus it is possible that under such a regime, an intentionally overbroad covenant could end up tying an employee’s hands for years although a majority of courts would find it unreasonable on its face. Hardship to employees is one significant factor to consider in determining the propriety of a restrictive covenant.
378 Ill. App. 3d 437, 456, 879 N.E.2d 512, 529 (1st Dist. 2007).
For example, in Deere Employees Credit Union v. Smith, 2016 IL App (3d) 150516-U (3d Dist. 2016), a customer non-solicit covenant prohibited the employee from soliciting customers whom he serviced, as well as any customers of the employer regardless of whether the employee serviced the customers. The lower court modified the covenant and enjoined the employee only from soliciting customers that the employee actually serviced. On appeal, the injunction was vacated by the appellate court. The appellate court, relying on Cambridge Engineering, held that judicially reforming the “selective, problematic language” would give “employers an incentive to draft restrictive covenants as broadly as possible,” relying on a court to “automatically amend and enforce” the covenants. Id. at ¶ 37.
The take away to employers in Illinois is to not depend on judicial modification to save overly broad restrictive covenants. Restrictive covenants should be narrowly tailored to only prohibit activity that threatens an employer’s legitimate business interests (confidential information and/or customer relationships) and no broader. Employers are advised to frequently review their existing agreements with their legal counsel to make sure the agreements remain enforceable.