Geographic Limitation

Non-compete agreements frequently include a geographical limitation by necessity. A restrictive covenant without a geographic limitation will almost never be enforceable. Often this geographic limitation is expressed by a radius around the company’s headquarters. Other times the geographic limitation is defined by listing specific cities or states in which the employer does business. A geographic limitation will only be enforceable if it is reasonable. What is reasonable depends largely on facts unique to each employer such as the goods or services provided, the size of the business, the amount of business the employer does in the restricted area, and the type and number of customers located within the restricted area.

In 2011, the Illinois Supreme Court considered the question of whether a geographic limitation in a restrictive covenant was reasonable. In Reliable Fire Equipment Company v. Arredondo, 2011 IL 111871, the geographic limitation of the non-compete agreement included all of Illinois, Indiana, and Wisconsin. The lower courts had determined that the geographic limitation was not reasonable. The Illinois Supreme Court held, however, that the large geographic limitation was reasonable to protect the employer’s legitimate business interests.

As stated previously, the reasonableness of a geographic limitation turns largely on the unique facts of each case. In the case of Callahan v. L.G. Balfour, 534 N.E.2d 565 (Ill.App. 1989), for instance, an Illinois appellate court found that a geographic limitation of Chicago and seven surrounding counties in a covenant not to compete was too large to be reasonable. The court stressed that such a restriction imposed an undue hardship on the employee who had thirty years in the industry and would have to move far away in order to find a job in the same industry and still comply with the non-compete agreement.

There is no one-size-fits-all geographic limitation and each state has its own standards for determining what limitation is reasonable. It is crucial to have an attorney familiar with the standards of your local court review a prospective or existing restrictive covenant for enforceability.

This is where the attorneys at DiTommaso can help. Our attorneys have decades of experience negotiating and litigating non-compete agreements and other restrictive covenants. Conveniently located in Chicago and Oak Brook, IL, we have a wealth of knowledge regarding the various standards applied by the courts in DuPage, Cook, and the surrounding counties along with the constant changes to those standards. Whether you are looking to negotiate a non-compete agreement or are being accused of violating one, a skilled attorney is needed. You can contact us online today or call us at 630-333-0000.