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The impact of Prairie Rheumatology Assoc. v. Francis on Non-Competes in Illinois

March 4, 2015

By Paul J. Doucette and Mark A. Costa 

In light of a recent decision in Prairie Rheumatology Associates, S.C. v. Maria Francis, D.O., 2014 IL App. (3d) 140338, in order to enforce non-competition agreements, Illinois employers should note that a minimum of two (2) full years of continuous employment may be required to enforce non-compete agreements. 

In Prairie Rheumatology Associates, S.C. v. Maria Francis, D.O., the Illinois Appellate Court, Third District, held that a restrictive covenant was unenforceable due to lack of consideration when: (1) the employee terminated employment less than two years after being hired, and (2) the employer did not perform valuable promises made to the employee at the time the parties entered into the employment agreement.

In the employment agreement at issue (“Agreement”), Prairie Rheumatology Associates, S.C. (“PRA”) agreed to pay Maria Francis, D.O. (“Dr. Francis”) an annual salary, assist Dr. Francis with gaining staff privileges at two hospitals, pay Dr. Francis’ hospital dues and introduce Dr. Francis to PRA patients and referral sources, including physicians on staff at affiliate hospitals.  In exchange for PRA’s obligations, Dr. Francis agreed to PRA’s terms of employment, including signing an agreement not to compete for 24 months after termination of her employment within a 14 mile radius of PRA’s corporate office. 

Dr. Francis worked for PRA for 19 months before leaving to work for a competing medical practice.  During that time, and with virtually no help from PRA, Dr. Francis grew her patient base from 136 to 1,118.  According to evidence at the preliminary injunction hearing, PRA failed to introduce Dr. Francis to referral sources, failed to assist Dr. Francis in obtaining her hospital credentials and failed to pay all of Dr. Francis’ credential fees.  The court held that the above inactions of PRA constitute a violation of the Agreement.

In its analysis, the court stated that continuous employment must be for a “substantial period of time beyond the threat of discharge” in order to support a restrictive covenant. Id., at ¶14.  The “promise of continued employment may be an illusory benefit where the employment is at will.” Id., citing Curtis 1000, Inc. v. Suess, 24 F.3d 941, 945-46 (7th Cir. 1994).  In accordance with precedent from the First, Second, Third and Fifth Illinois Appellate Court Districts[1], the Prairie court stated that adequate consideration is found when the employee has been employed continuously for two or more years, regardless of whether the employee’s employment is terminated by the employee or employer.  Id., at ¶15.  The Prairie court held that since Dr. Francis was employed for 5 months less than the 24 month minimum and received no additional benefits from PRA in exchange for Dr. Francis’ agreement not to compete, the restrictive covenant was unenforceable due to inadequate consideration.  Id., at ¶¶16-19.

In light of the 2 year bright line rule adopted by four appellate courts in Illinois, employers may consider including terms which go above and beyond employment itself in their employment agreements in order to strengthen the enforceability of their non-compete agreements.  Monetary terms which support consideration may include a bonus upon signing the non-compete agreement.  Non-monetary terms which support consideration may include delivery to the employee of highly confidential or trade secret protected information, introduction of the employee to long-standing customers of the employer or the promise of advancement within the company after a set amount of time.  Regardless of what consideration is offered to entice an employee not to compete, employers should fully perform on all promises set forth in their employment agreements.

[1] Fifield v. Premier Dealer Services, Inc., 2013 IL App (1st) 120327, ¶19; Diederich Insurance Agency, LLC v. Smith, 2011 IL App (5th) 100048, ¶15; Brown & Brown, Inc. v. Mudron, 379 Ill. App. 3d 724, 728-29 (3rd Dist. 2008); Lawrence & Allen, Inc. v. Cambridge Human Resource Group, Inc., 292 Ill. App. 3d 131, 138 (2nd Dist. 1997).

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