An Illinois First District case, McInnis v. OAG Motorcycle Ventures, Inc, 2015 IL App (1st)1142644, sheds light on the applicability of restrictive covenants on rehired employees.
Chris McInnis (“McInnis”) began employment with OAG Motorcycle Ventures, Inc., d/b/a city limits Harley-Davidson (“OAG”) in Palatine, Illinois, as a salesman in August 2009. OAG was one of four Harley-Davidson dealerships which comprise the Windy City American Motor Group (“WCAMG”).
McInnis became a top salesman before leaving OAG in October 2012 in favor of employment at Vroom Vroom, LLC, d/b/a Woodstock Harley Davidson (“Vroom”). McInnis worked at Vroom for a single day, after which he contacted OAG to request his previous job.
OAG agreed to re-hire McInnis on the condition that he sign a confidentiality agreement, which he signed on October 25, 2012. The noncompetition clauses of the agreement, in part, prohibitedMcInnis from being employed by or performing work for another Harley dealership within a 25 mile radius of OAG during and for 18 months subsequent to employment, and from influencing any person or business from terminating or diminishing any existing relationship with OAG or WCAMG.
The consideration set forth in the confidentiality agreement was “an offer of employment with Company in an at-will employment relationship, and Employee’s exposure to Company’s and/or WCAMG’s proprietary and confidential information as its employee.”
McInnis was re-hired, and OAG waived the 90-day trial period that was standard for new employees before becoming eligible for benefits.
During his employment with OAG, McInnis had access to OAG’s customer information (names, telephone numbers, and e-mail addresses), and retained 179 names, telephone numbers, and e-mails of clients in his cell phone.
In May 2014, McInnis again voluntarily resigned from OAG to work for Vroom. McInnissubsequently filed a declaratory complaint claiming the noncompetition provisions of the confidentiality agreement he signed with OAG were unenforceable due to inadequate consideration for same. OAG filed a counterclaim against McInnis, as well as a third-party claim against Vroom, alleging, in part, that the client data retained by McInnis was confidential information.
The trial court denied OAG’s motion for preliminary injunction and granted Plaintiff’s motion for declaratory judgment, finding that Harley customers are typically brand-loyal, regardless of where the product is purchased. The court also determined that the restrictive covenants imposed by the confidentiality agreement were unenforceable, citing Fifield v. Premier Dealer Services, Inc., 2013 IL App (1st) 120327, in which the court set the guideline that continuous employment for two or more years is sufficient consideration to support restrictive covenants. In this case, McInnis was only employed by OAG for approximately eighteen (18) months; therefore, the court stated it was necessary to prove additional consideration “such as added bonus in exchange for this restrictive covenant, more sick days, some incentives, some kind of newfangled compensation” was given. OAG asserted that its waiver of the 90-day trial period constituted additional consideration, but the court disagreed, finding that a trial period was not necessary, as McInnis had previously established himself within the company as a successful salesman.
OAG appealed, arguing that the trial court erred in misinterpreting Fifield by failing to utilize afact-specific approach to the unique situation. The First District Appellate Court disagreed, noting that in Fifield, length of employment was the only factor the court had to consider, where in this case, the trial court contemplated factors beyond the two-year employment guideline to determine if additional consideration had been given, and found none. Because no additional consideration was given, the appellate court agreed that the restrictive covenants were unenforceable, and affirmed the trial court’s ruling.
The decision in this case maintained the benchmark set forth in Fifield that two years of continuous employment is necessary for employment to be adequate as the sole consideration for the imposition of restrictive covenants. However, the court stipulated that some form of consideration in addition to employment could serve to negate the two-year requirement, but did not quantify the additional consideration requisite to do so. The case serves as guidance to employers who are rehiring former employees and attempting to impose restrictive covenants on them.
Authors: Brian F. Johnson is a shareholder at Johnson, Bunce & Noble, P.C. He focuses is practice in the areas of business and real estate. Darcie E. Curto is a paralegal in the firm and contributed greatly in the preparation of this article.