Noncompete Provisions Require Careful Drafting

According to the Howe & Hutton Report, a recent Illinois appellate court decision illustrates how important it is for employers to carefully draft noncompete provisions in contracts with their staff.

The court ruled in a suit by an employer against two former employees who had started a competing business within two months after they quit their jobs, even though they had employment contracts giving the employer a right to prohibit them from engaging in competing businesses for nine months after termination of employment.

The employer did not learn about the competing business until five months after the employees resigned. When the employer asked an Illinois trial judge to enjoin the employees from competing for nine months after issuance of the court’s order, rather than nine months from the employees’ resignation, that court refused, preliminarily enjoining them from competing only for the remainder of the nine-month period after they quit (only for a month from the date of the court order).

The appellate court upheld the trial judge’s ruling, pointing out the employment contracts could have specified that the employer was entitled to an extension of the original nine-month noncompete period in appropriate circumstances, but their contracts contained no such extension provision.

As in many other cases, the exact wording of a contract is often crucial in resolving disputes. Parties to a contract must carefully consider the future circumstances that might lead them to court, inserting specific language in contracts to better ensure that disputes will be resolved in their favor.