Jun 24, 2014

Summer camp non-competes: Some limits to the scope of non-competition restrictions

    As recently reported by The New York Times, a 19-year-old summer camp counselor had a job offer to work as a summer counselor rescinded because of a non-compete clause she signed with a different camp during the previous summer. The clause prohibited her from working for any competing summer camp within 10 miles for one year. Id.

    This story demonstrates how non-compete restrictions are being used by employers in a variety of jobs well beyond the traditional occupations in which non-competes have commonly been used, such as sales and technology. Even though non-competes appear to be expanding into a wide variety of occupations, employers in Illinois must be careful not to impose restrictions that are overly broad or do not identify the legitimate business interest being protected. 

   Under Illinois law, a covenant not-to-compete amounts to a restraint on trade. Therefore, courts carefully scrutinize such a covenant to ensure that its intended effect is not to hinder competition per se. Generally, a restrictive covenant that is ancillary to a valid employment relationship is reasonable only if the covenant:

    · Is no greater than necessary for the protection of a legitimate business interest of the employer;

    · Does not impose undue hardship on the employee-promisor, and

    · Is not injurious to the public. 

    Recent cases in Illinois have reaffirmed this approach in refusing to enforce defective non-competition restrictions. In Critical Care Systems, Inc. v. Heuer, the Illinois Appellate Court affirmed that a non-competition provision asserted against a pharmacist was not enforceable because the employer could not identify any legitimate business interest it was seeking to protect. 2014 IL App (2d) 130745-U.  In Montel Aetnastak, Inc. v. Miessen, the U.S. District Court for the Northern District of Illinois held that a non-competition restriction in an employment agreement with a shelving manufacturer was overly broad and unenforceable because it did not specify what activities it prohibited a former employee from engaging in for a competitor. 2014 WL 702322 (N.D. Ill. 2014).

   These cases demonstrate how carefully courts scrutinize non-competition restrictions. Any employer with such restrictions should consult with an attorney to ensure that the non-competes being used are truly enforceable.

This Chuhak & Tecson, P.C. communication is intended only to provide information regarding developments in the law and information of general interest. It is not intended to constitute advice regarding legal problems and should not be relied upon as such.

Client Alert authored by: Ryan A. Haas