Broker exec’s noncompete agreement ruled unenforceablePosted On: Apr. 2, 2019 12:52 PM CST
An Illinois appeals court has affirmed a lower court ruling in favor of a benefits broker’s former president who is now a Hub International Ltd. official, who was charged with violating his noncompete agreement.
Downers Grove, Illinois-based Axion RMS Ltd. had filed suit against its former president Michael Booth, who is now Hub International’s president of employee benefits and chief sales officer of Hub International-Midwest.
The basis of the ruling by the Chicago-based Appellate Court of Illinois is that the noncompete agreement Mr. Booth signed was unenforceable because he had served less than two years after signing the agreement.
Mr. Booth was hired by Axion as vice president of sales in 2010 and promoted to president in 2014, according to Friday’s ruling in Axion RMS Ltd. v. Michael Booth.
In January 2015, Mr. Booth signed an employment agreement that included a noncompete clause in which he agreed not to solicit Axion’s clients or employees for two years following his employment’s termination.
Mr. Booth resigned his position with Axion and began working for Hub International in December 2015, and allegedly began soliciting Axion’s existing clients and employees, according to the ruling.
Axion filed suit against Mr. Booth on charges including breach of contract based on his alleged violations of the noncompete clause. Mr. Booth moved to dismiss the complaint on the basis that, where the only consideration given to an employee in exchange for signing a noncompete agreement is continued employment, the employee must work at least two years for the agreement to be enforceable.
Axion argued the court shouldn’t apply a “bright-line test” of two years of employment but should apply a “totality of the circumstances test” instead.
The state court ruled in Mr. Booth’s favor, which was unanimously upheld by the three-judge appeals court. It is “well established by this court that a promise of continued employment for an at-will employee is adequate consideration to render a restrictive covenant enforceable, as long as there is at least two years of continued employment following the execution of the restrictive covenant,” said the ruling.
“In sum, Axion pled in its verified complaint that the only consideration given to Booth was his continued employment and that he resigned less than two years later. This is inadequate consideration under existing case law.
“Consequently, it is readily apparent from the face of Axion’s verified complaint that there is no possible set of acts which would render the noncompete clause in the employment agreement enforceable.
“Thus, the court did not err in dismissing Axion’s verified complaint,” said the ruling, which also held the trial court did not abuse its discretion in denying Axion leave to file a proposed amended complaint.
Neither Mr. Booth nor an Axion official could immediately be reached for comment.
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