Articles Posted in Noncompete Contracts

Within a year of when Michael Booth signed an employment agreement that had a non- competition clause, he resigned as president of Axion RMS and then went to work for a competitor. It was also alleged that, after leaving Axion RMS, he started luring away former colleagues. Axion sued Booth for the alleged violation of the non-compete contract.

A circuit court judge dismissed the case because (1) the alleged consideration for the restrictive covenant was Booth’s continued employment, and (2) several Illinois Appellate Court cases require, as a bright-line rule, two years of subsequent employment to qualify as adequate consideration for such provisions.

The circuit court judge also denied Axion’s request for leave to file an amended complaint that cured this problem (by alleging that the consideration for the non competition agreement included a boost in Booth’s salary, from $300,000 to $500,000 a year; his receipt of shares in the business; plus a promotion to president from vice president of sales).

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Noncompete agreements have always been controversial for the way they intend to or unintentionally restrict employees from gaining employment after leaving a job where a noncompete agreement was signed. In 2017, the Illinois General Assembly addressed concerns about noncompete clauses found in low-wage employees. Effective January 2017, the Illinois Right to Work Act prohibits private-sector employers from entering into noncompete agreements with low-wage employees, rendering such agreements facially illegal and void.

This Illinois law is similar to other states that have passed legislation that also limits the employer’s ability to restrict low-wage employees in noncompete contracts in the private-sector.

For example, in the last couple of years, Alabama, Hawaii, New Mexico, Nevada, Oregon, Utah and Washington have passed laws that restrict the enforceability of noncompete agreements. Other states, including New Jersey and Pennsylvania, have proposed legislation that mirrors restrictions in enforceability of noncompete agreements.

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Doug Miller owned two companies in Indiana:  E.T. Products, which blended and sold fuel-additive products, and Petroleum Solutions, which blended and sold lubricant products.

Petroleum Solutions also supplied a few customers with fuel additives from E.T. Products.

In January 2011, a group of investors led by Tom Blakemore purchased E.T. Products. As part of the sale, Miller and his son, Tracy, signed essentially identical non-competition agreements.

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