Shifting Requirements for Employee Confidentiality Agreements in Illinois?
A recent Illinois state appellate court decision increases the risk to employers utilizing confidentiality agreements that purport to cover “all information regarding a company’s business.”
In Assured Partners, Inc. v. Schmitt, No. 2015 Ill App. (1st) 141863 (1st Dist., October 26, 2015), the court sided with the employee and deemed certain provisions in his employment contract to be overly broad and unenforceable. The rejected language included provisions:
prohibiting the former employee from competing with the employer in any and all lines of business – even if different from those he handled during his employment;
prohibiting contact between a former employee and all of the employer’s customers – even those with whom he had no direct interactions; and
defining “confidential information” to include all information regarding the “business or affairs of the Company” and its affiliates.
This last item is likely to be the most surprising – and troubling – to other Illinois employers. Confidentiality provisions covering all information regarding an employer’s business are common, especially when coupled with a carve-out for allowing disclosure of information that “becomes generally known to and available for use by the public.” The provision at issue in AssuredPartners fit this description, stating 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.”
The AssuredPartners court deemed this confidentiality provision to be overly broad and refused to modify or enforce it. The court reasoned that “a great deal of information that is not ‘generally’ known to the public” does not merit protection under a confidentiality provision.”
While the result in cases of this type tends to be driven by their specific facts, this pronouncement by the Illinois Appellate Court is likely to be cited against Illinois employers seeking to enforce provisions of similar breadth.
When drafting confidentiality agreements, employers will want to consider not attempting to cover any and all information regarding their business and instead target a more 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.