Questions Remain Regarding Adequate Consideration under Illinois’ Freedom to Work Act | Seyfarth Shaw LLP
On January 1, 2022, the latest amendments to the Illinois Freedom to Work Act (“Act”) became effective. As we previously described, that Act sets forth various requirements governing restrictive covenant agreements in Illinois. Among other things, the Act codified the so-called Fifield Rule by defining adequate consideration for enforcement of a restrictive covenant to be either two years of employment or some other consideration, such as “additional professional or financial benefits.”
Not surprisingly, what are sufficient “additional professional or financial benefits” remains an open question. However, one recent appellate opinion from the Third Appellate District provides helpful instruction regarding the need to specifically identify the “additional professional or financial benefits” in any restrictive covenant agreement. In Midwest Lending Corp. v. Horton, 2023 IL App (3d) 220132, the Appellate Court affirmed the trial court’s dismissal of the plaintiff’s complaint pursuant to which the plaintiff sought to enforce certain post-employment restrictive covenants. The defendant, who was employed for only seven months, challenged the enforceability of the restrictive covenant agreement because he was not employed for at least two years and received no other consideration. In response, plaintiff relied upon a $25,000 sign-on bonus that defendant received as part of his offer letter and claimed that this bonus was “adequate consideration.” The court disagreed because the offer letter never identified the restrictive covenant agreement nor any of its terms. As such, the plaintiff failed to demonstrate that the bonus was consideration expressly provided in exchange for the defendant agreeing to the terms of the restrictive covenant agreement.
While Midwest Lending’s ruling was based on common law and not a construction of the Act, employers who opt to provide additional consideration to enforce restrictive covenant agreements should take care to explicitly identify the “additional professional or financial benefits” provided in exchange for the employee’s acceptance of the restrictive covenants.
