Illinois employers are reconsidering their confidentiality agreements after an Illinois appellate court recently rejected common agreement language. Specifically, agreements that try to protect “all information regarding a company’s business” may be more difficult to enforce, in light of a recent decision by an Illinois appellate court.
In Assured Partners, Inc. v. Schmitt, No. 2015 Ill App. (1st) 1411863 (1st Dist., October 26, 2015), the court ruled that certain provisions of an employee’s confidentiality agreement were overly broad and unenforceable, including a provision that prohibited the employee from sharing any information regarding the “business or affairs of the Company or its affiliates.” The court refused to modify or enforce the provision.
Why Does it Matter?
This is the most recent in a string of cases reflecting a judicial “tightening of the reins” in enforcing post-employment restrictions in Illinois, and it is likely to be particularly troubling for some employers. Confidentiality provisions covering all information regarding an employer’s business are common, and often escape judicial scrutiny, particularly when accompanied by a carve-out allowing for disclosure of information that becomes generally known and available to the public through no fault of the employee.
Of concern for many employers is that the provision at issue in Assured Partners included the carve-out, and stated, in pertinent part:
“Obligation to Maintain Confidentiality . . . . the information, observations and data (including trade secrets) obtained by Executive during the course of Executive’s employment with Employer concerning the business or affairs of [the Company and its affiliates] (‘Confidential Information’) are the property of the Company . . . . Therefore, Executive agrees that Executive will not disclose to any unauthorized Person or use for Executive’s own account (or the account of any Person other than the [ . . . Company or its affiliates] any Confidential Information without the Board’s written consent, unless and to the extent that the Confidential Information, (i) becomes generally known to and available for use by the public other than as a result of Executive’s acts or omissions to act or (ii) is required to be disclosed pursuant to any applicable law or court order.”
In holding this provision unenforceable, the court reasoned that even though a piece of information is not generally known to the public, it does not necessarily merit protection under a confidentiality agreement. The sweeping language of this decision could have far-reaching implications for Illinois employers.
What Should Illinois Employers Do?
The court’s pronouncement is an unusual one. Confidentiality agreement cases are typically driven by their specific facts. As such, their precedential value is limited. To err on the side of caution, when drafting confidentiality agreements, Illinois employers should avoid the temptation to include any and all business information within the purview of their confidentiality agreements, and instead aim to target a defined universe of information, e.g., by listing specific types or categories of confidential information.
The optimal approach and language will vary from one company to the next, depending on its particular industry and circumstances. To discuss your company’s confidentiality agreements, please contact Eric Barnum or Julie Stahr in Schiff Hardin’s Labor and Employment Group.