Howard Peritz


Illinois Court perspective on non-competition agreements

The Illinois Supreme Court has completely changed the way the Courts are to look at non-competition agreements. The decision seems to favor the entity attempting to enforce the non-competition agreement. In the case of Reliable Fire Equipment Co. v. Arredondo, 2011 IL 111871 published on December 1, 2011, the court confirmed that an employer must demonstrate a “legitimate business interest” (LBI) to enforce an otherwise reasonable post termination restriction on competition.

The decision, however, broadened what might constitute an LBI. The LBI is no longer limited to the protection of confidential information of “near-permanent customer relationships. An LBI may now be based upon the “totality of the circumstances.” Unfortunately for the employers and employees, the Court left unspecified what and how many factors may combine to create an LBI and how those factors are weighed against the restrictions sought against the employee. What does this mean to the employer? Most likely more restrictive covenants will have to be litigated and appealed to give the appellate and Supreme Courts the opportunity to provide more guidance that the Supreme Court has in this matter.

“Gross income from all sources” may not mean gross income from all sources

On Tuesday, March 13, 2012, the First District Appellate Court (the court that governs Cook County) issued a ruling that stated that a divorced attorney’s withdrawals from his retirement funds should not qualify as income for purposes of determining the amount of money he owes his ex-wife in maintenance.

The parties divorced in 2001 after 30 years of marriage. Under the divorce settlement, the husband was to pay $14,000 per month in maintenance to his ex-wife. In 2007, the husband filed a petition to terminate or decrease his maintenance obligation because his income decreases as a result of the merger of his firm with another firm.

In 2008, the firm dismissed the husband because of his dwindling business. The husband withdrew $695,000 from his pension and $36,000 from his 401(k) to meet the expenses of his establishing his own firm. Circuit Judge Pamela E. Loza decided to reduce the husband’s maintenance to 20 percent of his gross income from all sources which includes retirement withdrawals. The husband appealed and the Appellate Court ruled that the divorce settlement features language means that the wife agreed to waive any interest in David’s retirement plans.

It was wrong of the trial court to modify a property settlement agreement when one party waived interest in the property.