Fifield and the Northern District: A Stormy Marriage

The much-maligned Illinois decision of Fifield v. Premier Dealer Services, Inc. got a big jolt of life when another appellate district reaffirmed its essential holding: when an at-will employee signs a non-compete, continued employment can serve as adequate consideration for the agreement only if that employment continues for at least two years.

Before the Third District appellate court spoke in Prairie Rheumatology Assocs., S.C. v. Francis, there was a pretty legitimate debate brewing about whether Fifield was a one-off outlier that attorneys could take the chance of discounting. Francis gave Fifield credibility, as it is an awfully tall order for attorneys to criticize two separate appellate court rulings from different districts and argue Fifield did not represent the law of the state.

The Northern District of Illinois, though, apparently does not feel Francis did much to establish Illinois law on the adequacy of consideration for restrictive covenants.

Another federal court has declined to follow the Fifield-Francis two-year rule. Judge Shah's opinion in Bankers Life & Cas. Co. v. Miller, 2015 U.S. Dist. LEXIS 14337 (N.D. Ill. Feb. 6, 2015), found that the "the Illinois Supreme Court would ...reject a rigid approach to determining whether a restrictive covenant was supported by adequate consideration; it would not adopt a bright-line rule requiring continued employment for at least two years in all cases."

The reasoning for the court's analysis, in which it barely even cited Fifield, does not really mention that the Fifield-Francis rule applies in a limited factual circumstance: when the only consideration for an at-will employee's non-compete is continued employment itself. If the employee received a signing bonus, a contractual severance right, or stock options, then Fifield-Francis does not apply.

But in a great many cases - probably a majority - the rule will apply, because employers don't want to pay employees more than they have to, either in bonus, incentives, or equity. I am a little dubious of the proposition that "access to confidential information" or "training" qualifies as consideration, because employers probably will have a hard time showing they wouldn't have provided the employee these aspects of employment even without the non-compete. Further, it's somewhat illusory and intangible, hard to articulate really.

Judge Shah's opinion doesn't really address what else the employer may have offered the employees in Bankers Life, and perhaps the company threw in enough allegations to move beyond Fifield-Francis. But his opinion is the first to rely on the overall "totality of the circumstances" test that Illinois courts use to analyze a restrictive covenant's reasonableness. That rule does not, by its plain terms, implicate consideration at all.

Judge Shah appears to have looked at the logic underlying that test to conclude that courts would take a more holistic approach at assessing what consideration is adequate to support a restrictive covenant, depending on the employee and probably the terms of the covenant itself.

Or he may have read my dissenting opinion in Fifield and been persuaded.