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In 2011, the Illinois Supreme Court issued an important decision about non-compete provisions in an employment agreement.  The Illinois high court politely told the other appellate judges in Illinois that for the last 30 years, their court decisions had veered slightly off course in determining whether to enforce a non-compete.  Instead, the Illinois Supreme Court re-stated that a “three-dimensional rule of reason” is the applicable legal standard, as follows:

A non-compete covenant is reasonable only if it:

(1) is no greater than is required for the protection of a legitimate business interest of the employer-promisee,

(2) does not impose undue hardship on the employee-promisor, and

(3) is not injurious to the public.

Recent case in Sangamon County   

Guided by the Supreme Court’s directive, an Illinois appeals court recently applied these three factors in determining whether to enforce a non-compete against a tax preparer who left an H & R Block franchise and started her own business.

The Illinois court found that the non-compete provisions were reasonable.  Why?  The court noted that the two-year restriction only prohibited the former employee from preparing tax returns for “any Company Client.”   Thus, this covenant did not prohibit the tax preparer from preparing taxes or providing related services to the general public.  She was only prohibited from serving those clients she serviced while employed by plaintiff.

The Illinois Court concluded that this limited restriction reasonably balances a former employee’s right to earn a living with the employer’s right to protect its customer relationships and its investment in developing her skills.

Stay tuned for further developments as Illinois judges consider non-compete agreements under the “three-dimensional rule of reason.”