When the length of time an employee works for an employer is significantly shorter than the length of the term the employee may not compete against their employer, questions arise about whether or not the non-compete agreement should be enforced. Only a few non-compete agreements connect the length of the employee’s tenure with the length of the non-competition period.
“Consideration” is the value received by a party who agrees to give up something or do something of value in a contract. In the context of non-compete agreements, employees give up the right to compete against their employer for a specified period of time, involving particular job activities, in exchange for something of value from the employer, which usually includes money or continued employment. The period for non-competition is typically six months to two years.
A recent Illinois state case demonstrates how a court can consider whether or not a two year non-competition period is reasonable when the employee worked for the employer for only three months before resigning. Fifield v. Premiere Dealer Services, Inc., 2013 IL App. (1 St. 120327) (June 24, 2013). The employee sought declaratory relief that the non-competition provision was unenforceable for lack of adequate “consideration,” given the short term of employment and the length of the non-competition period. An Illinois state appellate court affirmed the trial court’s grant of the motion for declaratory relief, thus the non-competition agreement failed for lack of “considerations.”
The employer argued that continued employment was sufficient consideration for the non-competition provision. The court rejected that analysis, saying Illinois courts have repeatedly held that two years of continued employment was necessary for “consideration” to support a restrictive covenant in a non-compete agreement. Fifield asserted successfully that because his employment lasted only three months, it was far less than the time necessary to constitute sufficient “consideration.”
Wisconsin courts have not adopted the Illinois position concerning the length of continued employment necessary to provide adequate “consideration” to support a restrictive covenant, so the Fifield decision is not necessarily one that will be adopted in the State of Wisconsin. However, it may be a useful argument to make to a court where, as here, the period of employment is relatively short as compared to the length of the term of the non-competition provision. This may be especially true of the employee is terminated versus resigned.
Hawks Quindel’s employment attorneys have decades of experience representing Wisconsin employees, including those negotiating and enforcing non-compete agreements in Wisconsin. Contact either our Milwaukee attorneys or Madison attorneys for assistance in such cases.
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