Chicago Daily Law Bulletin - Two years of continuous employment rule not as
1. Chicago Daily Law Bulletin - Two years of continuous employment rule not as solid as it may seem
http://www.chicagolawbulletin.com/Articles/2016/01/20/Paul-Porvaznik-forum-1-20-16.aspx[1/20/2016 5:32:59 PM]
January 20, 2016 Print friendly page
Commercial
Litigation
By Paul B.
Porvaznik
Paul B.
Porvaznik is
an attorney
at Davis,
McGrath
LLC and practices
primarily in the areas of
commercial litigation,
landlord-tenant law,
mechanic’s liens and
post-judgment
enforcement.
Two years of continuous
employment rule not as
solid as it may seem
A federal court in Illinois recently
waded into the “what’s the length of
continuous employment to support a
restrictive covenant?” morass.
Ever since an Illinois Appellate Court
ruled in Fifield v. Premier Dealer
Services Inc., 2013 IL App (1st)
120327, that two years of sustained
employment is required for an
employer to enforce a restrictive
covenant, Illinois courts at different
levels have given the two-year rule
varying amounts of deference. Some
follow the rule to the letter, applying
it rigidly, while others adopt a fluid,
fact-based test that looks at more
than just a cold chronology.
The case of Traffic Tech v. Kreiter,
2015 WL 9259544 (N.D. Ill. 2015)
falls squarely in the latter flexible approach camp. There, the
U.S. District Court for the Northern District applied a totality of
circumstances test to a trucking firm’s non-solicitation term in a
lawsuit against a departed employee who joined an industry
rival.
The company sued when the ex-employee resigned nine months
after his hire date and began working for a competitor. The
former employee previously signed an employment contract that
contained an 18-month non-solicitation term. In its suit, the
plaintiff sought to prevent the employee from using the plaintiff’s
trade secrets and soliciting the plaintiff’s client in the employee’s
current position.
The employee moved to dismiss the action on the basis that the
restrictive covenants lacked consideration since he never worked
a full two years for the plaintiff and the non-solicitation clause
had no geographic limit (it had a nationwide reach).
Denying the motion to dismiss, the court tried to square
divergent cases reaching different results on the level of
consideration required for an employer to enforce a non-
Serving the city's law profession since 1854
Home Courts ▼ Calendar Public Notices 40 Under 40
2. Chicago Daily Law Bulletin - Two years of continuous employment rule not as solid as it may seem
http://www.chicagolawbulletin.com/Articles/2016/01/20/Paul-Porvaznik-forum-1-20-16.aspx[1/20/2016 5:32:59 PM]
solicitation term against a departing worker.
In Illinois, continued employment for a “substantial period” is
generally needed to establish that a contractual restrictive
covenant is supported by consideration. While some courts like
Fifield have categorically found that anything less than two years
of doesn’t qualify as a substantial period of time, Kreiter
predicted that the Illinois Supreme Court would adopt a less
rigid and more fact-specific test.
A key factor that gave the court pause on the consideration
question was that the plaintiff paid the defendant a $250,000
signing bonus (equal to a year’s salary) at the start of his
employment. The bonus, the defendant’s quick exit and other
unresolved fact questions led the court to deny the motion to
dismiss.
Next, the court focused on whether the plaintiff’s breach of
fiduciary duty claim was pre-empted by the Illinois Trade
Secrets Act. Part of it was; part of it wasn’t. The plaintiff alleged
that the defendant, a management-level employee, owed the
plaintiff a fiduciary duty not to tamper with the plaintiff’s
business.
The Illinois Trade Secrets Act displaces conflicting common-law
civil claims that essentially mirror the act’s claim pleaded in the
same complaint. But the act does not pre-empt contractual
remedies that are not based on trade secret misappropriation.
When determining whether a given claim is pre-empted by the
act, the court looks at whether the non-ITSA claim seeks a
remedy for conduct that goes beyond misappropriation.
The court found that the plaintiff’s breach-of-fiduciary duty claim
was bottomed on the allegations that the defendant violated his
duty of loyalty to the plaintiff by trying to divert customers to a
competitor (the defendant’s current company) and by bad-
mouthing the plaintiff to its customers.
These pleaded facts were enough to survive a motion to dismiss
and were factually far enough removed from the trade secret
claim to escape ITSA preemption. As a result, the court denied
the defendant’s motion to dismiss the plaintiff’s breach of
fiduciary duty claim.
Afterwords
While it’s a simple motion to dismiss order (meaning: the case is
still going and hasn’t been decided on its merits), the Kreiter
case presents a useful summary of some signature issues that
recur in the commercial litigation and employment law arenas.
Kreiter is representative of a line of cases where a court refuses
to apply a rote, paint-by-the-numbers approach to deciding
whether a restrictive covenant is enforceable. Employer-side
practitioners in Illinois can add this case to the anti-two-year
rule case canon when trying to enforce a non-solication or non-
compete term.
Kreiter and cases like it make clear that the more flexible a
court’s analysis is, the better chance an employer has in
enforcing a restrictive covenant against an inadequate
consideration argument.
Kreiter’s other key holding is that even where a non-solicitation
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4. Chicago Daily Law Bulletin - Two years of continuous employment rule not as solid as it may seem
http://www.chicagolawbulletin.com/Articles/2016/01/20/Paul-Porvaznik-forum-1-20-16.aspx[1/20/2016 5:32:59 PM]
![Chicago Daily Law Bulletin - Two years of continuous employment rule not as solid as it may seem
http://www.chicagolawbulletin.com/Articles/2016/01/20/Paul-Porvaznik-forum-1-20-16.aspx[1/20/2016 5:32:59 PM]
January 20, 2016 Print friendly page
Commercial
Litigation
By Paul B.
Porvaznik
Paul B.
Porvaznik is
an attorney
at Davis,
McGrath
LLC and practices
primarily in the areas of
commercial litigation,
landlord-tenant law,
mechanic’s liens and
post-judgment
enforcement.
Two years of continuous
employment rule not as
solid as it may seem
A federal court in Illinois recently
waded into the “what’s the length of
continuous employment to support a
restrictive covenant?” morass.
Ever since an Illinois Appellate Court
ruled in Fifield v. Premier Dealer
Services Inc., 2013 IL App (1st)
120327, that two years of sustained
employment is required for an
employer to enforce a restrictive
covenant, Illinois courts at different
levels have given the two-year rule
varying amounts of deference. Some
follow the rule to the letter, applying
it rigidly, while others adopt a fluid,
fact-based test that looks at more
than just a cold chronology.
The case of Traffic Tech v. Kreiter,
2015 WL 9259544 (N.D. Ill. 2015)
falls squarely in the latter flexible approach camp. There, the
U.S. District Court for the Northern District applied a totality of
circumstances test to a trucking firm’s non-solicitation term in a
lawsuit against a departed employee who joined an industry
rival.
The company sued when the ex-employee resigned nine months
after his hire date and began working for a competitor. The
former employee previously signed an employment contract that
contained an 18-month non-solicitation term. In its suit, the
plaintiff sought to prevent the employee from using the plaintiff’s
trade secrets and soliciting the plaintiff’s client in the employee’s
current position.
The employee moved to dismiss the action on the basis that the
restrictive covenants lacked consideration since he never worked
a full two years for the plaintiff and the non-solicitation clause
had no geographic limit (it had a nationwide reach).
Denying the motion to dismiss, the court tried to square
divergent cases reaching different results on the level of
consideration required for an employer to enforce a non-
Serving the city's law profession since 1854
Home Courts ▼ Calendar Public Notices 40 Under 40](https://image.slidesharecdn.com/54883e2d-8fba-42ce-900f-53629b1937ae-160122182934/85/chicago-daily-law-bulletin-two-years-of-continuous-employment-rule-not-as-1-320.jpg)
![Chicago Daily Law Bulletin - Two years of continuous employment rule not as solid as it may seem
http://www.chicagolawbulletin.com/Articles/2016/01/20/Paul-Porvaznik-forum-1-20-16.aspx[1/20/2016 5:32:59 PM]
solicitation term against a departing worker.
In Illinois, continued employment for a “substantial period” is
generally needed to establish that a contractual restrictive
covenant is supported by consideration. While some courts like
Fifield have categorically found that anything less than two years
of doesn’t qualify as a substantial period of time, Kreiter
predicted that the Illinois Supreme Court would adopt a less
rigid and more fact-specific test.
A key factor that gave the court pause on the consideration
question was that the plaintiff paid the defendant a $250,000
signing bonus (equal to a year’s salary) at the start of his
employment. The bonus, the defendant’s quick exit and other
unresolved fact questions led the court to deny the motion to
dismiss.
Next, the court focused on whether the plaintiff’s breach of
fiduciary duty claim was pre-empted by the Illinois Trade
Secrets Act. Part of it was; part of it wasn’t. The plaintiff alleged
that the defendant, a management-level employee, owed the
plaintiff a fiduciary duty not to tamper with the plaintiff’s
business.
The Illinois Trade Secrets Act displaces conflicting common-law
civil claims that essentially mirror the act’s claim pleaded in the
same complaint. But the act does not pre-empt contractual
remedies that are not based on trade secret misappropriation.
When determining whether a given claim is pre-empted by the
act, the court looks at whether the non-ITSA claim seeks a
remedy for conduct that goes beyond misappropriation.
The court found that the plaintiff’s breach-of-fiduciary duty claim
was bottomed on the allegations that the defendant violated his
duty of loyalty to the plaintiff by trying to divert customers to a
competitor (the defendant’s current company) and by bad-
mouthing the plaintiff to its customers.
These pleaded facts were enough to survive a motion to dismiss
and were factually far enough removed from the trade secret
claim to escape ITSA preemption. As a result, the court denied
the defendant’s motion to dismiss the plaintiff’s breach of
fiduciary duty claim.
Afterwords
While it’s a simple motion to dismiss order (meaning: the case is
still going and hasn’t been decided on its merits), the Kreiter
case presents a useful summary of some signature issues that
recur in the commercial litigation and employment law arenas.
Kreiter is representative of a line of cases where a court refuses
to apply a rote, paint-by-the-numbers approach to deciding
whether a restrictive covenant is enforceable. Employer-side
practitioners in Illinois can add this case to the anti-two-year
rule case canon when trying to enforce a non-solication or non-
compete term.
Kreiter and cases like it make clear that the more flexible a
court’s analysis is, the better chance an employer has in
enforcing a restrictive covenant against an inadequate
consideration argument.
Kreiter’s other key holding is that even where a non-solicitation
You May Also Like
Latest listings from
Jobs.LawBulletin.com
ARDC: Wires crossed,
but no misconduct
High court rules
against Florida death
penalty
Kirkland team
shelters $1.4B in
bankruptcy duel
Are police shielded by
union contracts?
Alabama sues federal
government over
refugee program
Charged protesters
claim rights under
1855 treaty
Keystone pipeline
sponsors file suit,
challenge Obama
rejection
At top court, man
argues for himself
Paralegals - Paralegal
Legal Administrators - Receptionis
Assistant
Attorneys - Attorney
Legal Secretaries - General office
Legal Secretaries - Family Law Se
Law/Docket Clerks - Project Assist](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)