Non-competition agreements and clauses are a hot topic in the legal sector. They are sometimes enforceable, but more often than not they are struck down if litigated. The problem sometimes can be that an employee does not wish to spend the time or money to litigate these issues.
An example of a non-competition restrictive covenant being shot down played itself out in a sports context. Sports helmet manufacturer Riddell Inc. sued to preclude a former employee from working at new employer BSN Sports Inc.
Riddell alleged a concern that the employee would share confidential information gained while at Riddell, with the new employer. The judge decided otherwise. It was held that the non-compete clause in the employment contract was not “necessary or reasonable.”
The discussion on enforceability of non-competition clauses was part of motion practice regarding Riddell’s intent to receive a preliminary injunction. Certainly, the standards are higher at that juncture of litigation, with Riddell needing to show a likelihood of success on the merits of its action.
Furthermore, it should be noted that the case sits in federal court in the Northern District of Illinois. The same result may not necessarly be reached in every other jurisdiction within the United States.
Anyhow, the judge here said that under Illinois law, not only does the restrictive covenant need to be reasonable and necessary to protect a legitimate business interest of the employer, an employer also “bears the burden of demonstrating that the full extent of the restraint is necessary to protect its interests.”
In the meantime, the employee will be allowed to continue working elsewhere. Without a sincere justification for concern that confidential information would leak, Riddell did not have a leg to stand on.