Bad facts make bad law, the saying goes. In the non-compete world, it might more aptly be said that filing a weak lawsuit against a sympathetic defendant makes bad law.
A recent decision by the Illinois Appellate Court is a good example. The court refused to enforce a non-solicitation agreement that many judges would have upheld under the right circumstances. The likely (if unspoken) reason? The defendant was a low-wage employee who fixed car dents for a living and who hadn’t done anything particularly wrong after quitting his job.
Defendant Autobody Technician Required to Sign Broad Restrictive Covenant
Plaintiff Dent Wizard was in the business of providing autobody repair services to car dealerships. Defendant Andrzejewski worked as a service technician for plaintiff, doing touch-up jobs on-site at car dealerships.
Defendant signed a Confidentiality and Non-Competition Agreement as a condition of his employment. The agreement had separate non-competition and non-solicitation provisions, both running for two years from termination.
- The non-compete provision barred defendant from competing with plaintiff in three counties in northern Illinois.
- The non-solicitation covenant barred defendant from soliciting or engaging in business of the type conducted by plaintiff with any customer or supplier he had “direct or indirect contact” with in the previous 18 months or about whom he learned confidential information belonging to plaintiff.
Defendant Resigns & Performs Work for Customer who Contacted Him
Defendant became dissatisfied with working for plaintiff and quit to form his own business. A few weeks after he resigned, one of car dealerships defendant had serviced as an employee of plaintiff contacted him about doing touch-up jobs for them.
The record was clear that the auto dealership that initiated contact with defendant, rather than vice versa. Defendant charged the dealership $25 for buffing, which was less than plaintiff charged.
Court Finds Restrictive Covenant Overly Broad & Unenforceable
After learning that defendant was doing repair jobs for the dealership, plaintiff filed a suit seeking to enforce the non-solicitation provision. After an evidentiary hearing, the trial court denied plaintiff’s request for a preliminary injunction. The trial court characterized the restriction as a “non-competition provision wrapped in a word salad as a non-solicitation agreement” and refused to enforce it even to the limited extent sought by plaintiff.
The appellate court affirmed, holding that the agreement’s restrictions were impermissibly overbroad and therefore unenforceable under Illinois law. In addition, the appellate court found that the trial court was justified in refusing to blue pencil the restrictions and enforce them as narrowed.
In seeking reversal of the trial court’s decision, plaintiff emphasized the fact that it was not trying to enforce the non-competition provision and only sought to enjoin defendant from servicing the two customers he had primarily worked for while employed by plaintiff. The appellate court was not convinced. “What matters to the enforceability of a restrictive covenant is the scope of the restrictive covenant itself, not the scope of the relief sought.” Further, the appellate court held that the agreement had to be “construed as a whole” rather than examining its provisions in isolation.
But even considered on its own, the non-solicitation clause overbroad and unreasonable according to the appellate court. The non-solicit did not apply simply to customers defendant had provided services to, but to customers he had “direct or indirect contact” with or about whom he learned confidential information. An addition, as the trial court noted, the no-solicit provision also barred defendant from providing services to clients and thus, in effect, “contains within it a covenant not to compete.”
Nor did the fact that the agreement contained a “severability clause” save it. Rejecting plaintiff’s argument, the appellate court found that it was within the trial court’s discretion to refuse to judicially modify the agreement and enforce it as narrowed, even with a severability clause. It was unfair for plaintiff to draft an overbroad agreement and put defendant “in the position of either proceeding at his own peril or engaging the court to determine the scope of his obligations.”
Takeaway? Think Twice Before Suing a Low-Wage Worker on a Non-Compete
Although the appellate court makes a solid case for the unreasonableness of the agreement, it is not hard to imagine the court upholding the restrictive covenant on other facts. The no-solicit was narrower than many that are enforced by courts. Although somewhat inartfully drafted, the no-solicit covered only customers defendant had dealt with in the prior 18 months or about whom he had confidential information. This is a very typical limitation – and narrower than some. The appellate court went out of its way to nitpick the language.
The reason? Although the appellate court does not say so, it had to be influenced by the fact that defendant was a blue-collar employee who presumably made a modest wage. (As the court notes, he charged $25 for buffing jobs.)
In addition, he didn’t engage in any of the bad acts often found in these cases, like taking a customer list or proactively contacting customers. The auto dealership contacted him — and then only after it had experienced problems with the service it was getting from plaintiff after defendant’s departure.
It is hard to know what plaintiff was thinking in filing this suit and even tougher to understand why it appealed the trial court’s ruling. There may have been circumstances that do not appear in the appellate court’s opinion that motivated the suit. But even if plaintiff had good reason to file suit, this case still shows the pitfalls of seeking to enforce restrictive covenants against low-wage workers.
It also serves as a reminder that employers should use the narrowest possible agreement with employees. In most instances, employees like defendant probably shouldn’t be asked to sign true non-compete agreements. Even if the employer does not intend to enforce the non-compete, the employer runs the risk of having a court throw the entire agreement out, as the court did here.
James L. Komie is an attorney with Howard & Howard in Chicago, IL. He regularly writes and speaks on new developments and trends in the law regarding non-competes and trade secrets, as well as issues relating to the financial services industry.