By Sarah G. Anderson
In Illinois, the test for whether a non-solicitation agreement is supported by sufficient consideration to enforce against an employee at will is a fact-specific inquiry, and does not require two years of employment if the employee voluntarily quit and received the full benefit of the original employment terms throughout the period of employment.
R.J. O’Brien & Assoc., LLC vs. Williamson, No. 14 C 2715 (N.D. Ill., 3/10/16).
Plaintiff, a large, independent futures brokerage and clearing firm, hired defendant to execute trades on behalf of commodity funds and other brokers. As a condition of his employment, defendant executed plaintiff’s Confidentiality and Non-Solicitation Agreement and an Associated Person Agreement (collectively, “the Agreements”), both of which prohibited him from soliciting plaintiff’s customers or employees to leave the firm during his employment or for one year after his departure.
A year later, defendant left to join Wells Fargo to start a new Futures Commodity Merchant Group (“FCM”). Before he left, according to the Court, defendant unsuccessfully tried to convince a number of his colleagues to move from plaintiff to Wells Fargo, though only one of them, Janet Mirasola, joined Wells Fargo after plaintiff rejected her for an executive position she requested. In this action, plaintiff alleges that defendant breached the Agreements. Defendant moves for summary judgment on both counts.
When Is the Consideration Adequate?
Defendant first argues that the two Agreements are invalid for lack of adequate consideration. Consideration is traditionally relatively easy to demonstrate, as courts generally look only to its existence, not its adequacy. In the context of post-employment restrictive covenants, however, courts depart from that rule and analyze adequacy. A promise of continued employment may be an illusory benefit when the employment is at will and must be for a substantial period of time to be considered adequate. Defendant argues that for a restrictive covenant to be enforceable, there must be at least two years or more of continued employment to constitute adequate consideration. Other courts, however, have rejected the two-year bright line rule in favor of also considering other factors on a case by case basis.
Although the Illinois Supreme Court has not reached the issue, several federal courts have predicted how it would rule on the issue. The Court in this case agrees with the majority of decisions that have predicted that the Illinois Supreme Court will reject the two-year bright line rule in favor of a fact specific test. Here, although defendant was employed at will for only a year, he was not terminated but quit to work for a competitor, and plaintiff did nothing to alter the terms of his employment, which included commissions and a generous salary. Moreover, the test is more lenient where, as here, the employer seeks damages, rather than injunctive relief. Thus, the Court concludes that the restrictive covenants are not invalid for lack of adequate consideration.
A Question for the Jury
Defendant next argues that there is no evidence that he solicited any of plaintiff’s employees. The Court rejects this contention as “specious,” finding ample evidence from which a jury could conclude that defendant solicited several employees to leave plaintiff and join Wells Fargo. Whether Mirasola moved as a result of defendant’s solicitation or plaintiff’s refusal to give her the position she requested is a genuine issue of material fact. The Court denies defendant’s motion for summary judgment.
(SLC Ref. No. 2016-15-04)
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