Breach of Contract – Employment Agreement – Restrictive Covenant

Listen to this article

Civil

7^th Circuit Court of Appeals

Officials: EASTERBROOK, WILLIAMS, and HAMILTON, Circuit Judges.

Breach of Contract – Employment Agreement – Restrictive Covenant

No. 14-2132 & No. 14-2243 Instant Technology LLC v. Elizabeth DeFazio

Where Defendant admits to breaching a restrictive covenant in an employment agreement but covenant is held unreasonable and unenforceable under Illinois law for failure to serve a legitimate business interest.

“Tech-staffing firms do not build relationships with clients that would justify restricting their employees from setting out on their own. In fact, the court found, clients show barely any loyalty to the firms they use; larger organizations routinely request service from five to ten firms at once, and a firm can expect compensation only a tenth of the time it recommends a candidate for a position. 40 F. Supp. 3d at 1004, 1012. Employees of tech staffing firms also aren’t exposed to important private information. Instant did keep data about qualified IT workers and maintained lists of candidates likely to hit the market soon. But (as we’ve already discussed) the court found that anybody can access most of that information with little work, and, given that most good candidates find jobs quickly, lists of active candidates have short shelf lives. Id. at 1012–13. Instant also could not rely on its interest in a “stable workforce” to justify a covenant not to recruit. Its workforce was never stable; 77% of the people who worked there two years before the trial left in the interim. Id. at 1013–14.”

Affirmed

Full Text

Attorney Derek A. Hawkins is the managing attorney at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.