Mind Your Jurisdiction

Non-Compete, Restrictive Covenant, Remote Work, Illinois

Can a former employee be sued for violating a non-competition agreement in a State the employee has never set foot in? The answer, according to the U.S. District Court for the Northern District of Illinois in Tekway, Inc. v. Agarwal, 19-CV-6867 (Oct. 7, 2020), is quite likely “Yes” if that State is where the employer is based and the employee has “directed” conduct to that State.

Here is the background: Agarwal, the employee, lived in New Jersey when she entered into an employment agreement with Tekway, the former employer, an Illinois corporation with its headquarters in Illinois. She subsequently moved to Colorado and began working remotely for a client of Tekway. She never set foot in Illinois. Later, she terminated her employment with Tekway and commenced employment with a Tekway competitor in apparent violation of the one-year non-competition provision in her employment agreement. Tekway sued Agarwal in Illinois and Agarwal moved to dismiss the claim asserting that Illinois courts could not exercise personal jurisdiction over her.

The District Court disagreed. The Court reasoned that the employee had sufficient contacts with Illinois—the location of the former employer and the State where the employee was sued– to satisfy the constitutional requirements of due process. In so concluding, the Court looked to the actions of the employee that demonstrated that she had “purposefully directed” her activities to Illinois and that those activities were directly related to the conduct at issue in the litigation—here her breach of a contractual non-competition provision. The Court further observed the employee’s contacts with Illinois were not “random” or “fortuitous,” but instead arose out of contacts that the employee herself purposefully created with the Illinois.

What was that conduct? Initially, the Court explained that it is not enough that there be a contract between the employee and the employer to create jurisdiction. Instead, a court must look to the “totality of the circumstance.” In this case, the Court found that the employee had “knowingly and voluntarily” entered into an employment relationship with an Illinois corporation headquartered in Illinois, that she consented to an ongoing relationship with that Illinois corporation, and that she reaped the benefits of working for a corporation based in Illinois.

Additionally, the employment agreement contained an Illinois choice-of-law provision, which the Court explained, “should have planted the seed that litigating [in Illinois] was a possibility” because the most common place to litigate Illinois law would be Illinois.

Of lesser weight in the Court’s opinion was the employee’s focus on the fact that she had never physically entered in Illinois. As the Court noted, “Personal jurisdiction does not require physical presence,” especially where in “modern commercial life” a substantial amount of business, including between an employee and employer, is conducted by phone, email, and messaging apps. The Court concluded that the non-competition provision “cemented” long-term ties to a company based in Illinois and the alleged injuries that flowed from the employee’s breach of that provision concerned Illinois-related activities—the employment relationship.

Finally, the Court ruled that the fact that the employee would face the burden of out-of-state litigation did not make jurisdiction unfair, that the employer would face a similar burden if it was required to litigate in the employee’s home state, and that Illinois had a strong public policy in providing a forum for its citizens, including its corporate citizens, alleging a breach of a non-competition agreement. As a result of these considerations the Court determined that the employee had not met her burden of establishing that jurisdiction of the employer’s claim in Illinois offended “traditional notions of fair play and substantial justice.”

Michael Braun concentrates his practice in labor & employment, civil litigation, and financial services. He litigates in both courts and arbitral forums, and counsels in the areas of employment, restrictive covenants, trade secrets, and business disputes.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s