Tag Archives: Illinois Supreme Court

Illinois Supreme Court Rules Public Employers Can Keep Disciplinary Records Longer Than Union Contracts Provide

Contributed by Carlos Arévalo, June 24, 2020

3d illustration of scales of justice and gavel on orange background

On June 18, 2020, the Illinois Supreme Court ruled that enforcement of a union contract provision mandating the destruction of disciplinary records was against Illinois’ public policy of preserving and retaining public records. The decision settles an ongoing dispute between the City of Chicago and the Fraternal Order of Police, Chicago Lodge No. 7 (FOP) about the disposition of disciplinary records. 

Since 1981, the parties’ contract has included a requirement that disciplinary records be destroyed after five years. Things changed in 1991 when a federal court in a civil rights lawsuit ordered the city to cease destroying complaint register files. The city subsequently attempted to negotiate contract changes removing the record destruction requirements, but these efforts proved unsuccessful. In 2011 and again in 2012, the FOP grieved the city’s failure to destroy records. The city denied the grievance and the FOP initiated arbitration proceedings. Matters became more complicated in 2015 when the US Department of Justice (DOJ) launched an investigation into the Police Department’s alleged use of excessive force and discriminatory policing. 

In early 2016, the arbitrator sustained the FOP’s grievance and ordered the parties to negotiate over the destruction of records. The arbitrator later amended his initial award and denied the FOP’s grievances solely on the “public policy” of the DOJ’s request to preserve documents. However, in response to the FOP’s request for reconsideration, the arbitrator issued a third and final award ruling that the initial 2016 award (allowing the destruction of records) could take effect “once the DOJ completed its investigation.”  The city filed a successful circuit court petition to vacate the arbitration award on the ground that it violated Illinois public policy favoring the retention of public records. The appellate court agreed and the Supreme Court then agreed to consider the case.

In its decision, the Supreme Court rejected the FOP’s arguments that the Illinois Public Labor Relations Act established a public policy in favor of enforcing labor arbitration awards over any other laws. The Court also held that union contracts, and arbitration awards based on those contracts, could not trump state laws where a “public policy exception” exists. Accordingly, the public policy inherent in the Local Records Act regarding the preservation, retention and disposition of public records was given precedence over the union contract disciplinary record destruction requirements. 

While this decision was welcomed by those seeking police reform and transparency, particularly in the current political landscape, labor advocates believe the decision unduly weakens the Illinois Public Labor Relations Act and labor agreements across the state.  We can expect the Illinois Assembly will take on the issue and introduce remedial legislation.  Until then, however, government employers should review contract provisions regarding the destruction or preservation of disciplinary records to ensure compliance with the Court’s decision.

The Ongoing Debate About Adequate Consideration in Non-Competition and Other Restrictive Covenants

Contributed by Carlos Arévalo

In late June, the appellate court for the first district reiterated that employment lasting less than two years is inadequate consideration to support enforcement of a post-employment restrictive covenant. In McInnis v. OAG Motorcycle Ventures, a motorcycle salesman filed a lawsuit seeking to have his non-competition agreement declared invalid because he resigned 18 months after signing the agreement. The employer counterclaimed seeking an injunction to enforce the restrictive covenant. The salesman won.Featured image

The court came to this conclusion after examining the 2013 first district case, Fifield v. Premier Dealer Services, Inc. That case has been criticized because of its emphasis on the duration of employment after the execution of the agreement, as opposed to reviewing the totality of the circumstances under the Illinois Supreme Court standard. The case involved an employee who was laid off when his employer was purchased by another company. The new company offered the employee a job, but required him to sign a non-competition agreement. While he signed the agreement, the employee resigned three months later. The employee and his new employer sued to invalidate the agreement. The court agreed and established a bright-line rule that employment lasting less than two years after signing a non-competition agreement would not be sufficient consideration. Before this decision, courts had maintained that employment for a “substantial” period of time would be sufficient consideration. The employer, supported by the Illinois Chamber of Commerce, appealed the Fifield decision to the Illinois Supreme Court. However, the appeal was denied.

The Third District Court also adopted the two-year rule. In the 2014 case of Prairie Rheumatology Associates, S.C. v. Francis, the court held that a physician, who left the practice after 19 months, was not bound by her non-competition agreement. Some federal court judges, however, have expressed skepticism that the Illinois Supreme Court would adopt the two-year rule. In February, Judge J.B. McDade of the Central District noted that the two-year rule in Fifield is “overprotective of employees, and risks making post-employment restrictive covenants illusory for employers subject completely to the whimsy of the employee as to the length of his employment.”

This ongoing debate is by no means settled. In fact, Justice David Ellis disagreed with the majority of the court in the McInnis decision. In his dissent, Justice Ellis stated that he does not believe that a per se rule exists in Illinois nor that a bright-line, two-year rule is warranted.  We will have to wait and see what happens.

Until the issue is settled by the Illinois Supreme Court, employers should review their existing restrictive covenants to ensure that there is sufficient consideration in light of these court decisions and should carefully analyze what consideration is being offered in agreements currently being negotiated. This additional consideration can take the form of added bonuses, additional benefits such as more sick or vacation time, or other incentives particular to the individual business and employees.

More Bad News for the Employer of the Misbehaving Employee

Contributed by Anita Johnson

Terminating an employee for willful misconduct while on light duty related to a compensable workers’ compensation claim, has long resulted in the employee’s loss of total temporary disability benefits in most jurisdictions.  However, an Illinois Supreme Court recently decided that termination of an employee based on questionable conduct (engaged in by other employees without discipline), does not provide a basis for termination of total temporary disability benefits.

Rather than focus on an evaluation of the issue of misconduct, the Court applied a test as to whether or not the petitioner’s condition had stabilized at the time he was working under restrictions.  The most obvious issue with this test is that most light duty programs are temporary.  The Court did affirm that voluntarily refusing light duty work would result in loss of total temporary disability benefits.

In a recent case, Matuszczak v. The IL Workers’ Comp. Comm., 2014 IL App (2d) 130532WC, the defense focused on the rationale employed in most states, maintaining that certain conduct resulting in termination amounts to a refusal of work.  The case involved the termination of an employee after he repeatedly stole cigarettes from his employer with knowledge that the theft could result in his termination.  In that matter, the Illinois Appellate Court refused to analyze the willful quality and knowledge of the petitioner, applying only a standard as to whether or not his medical condition had been stabilized at the time he was terminated.  The court awarded total temporary disability benefits.  The court specifically ruled that knowledge of the employee that his conduct could have resulted in termination did not amount to a refusal of light duty work.

This decision leaves employers in Illinois that return an injured employee to work under temporary restrictions in the uncomfortable position of being unable to discipline that employee for willful and sometimes even outrageous/criminal misconduct, without then providing unlimited total temporary disability benefits.  Once severed from employment, the injured worker has no incentive to ever have the condition resolved and restrictions removed and will be able to establish difficulty in finding employment elsewhere.  This obviously flies in the face of all other leave laws and the concept of “temporary” light duty programs in that they provide work for the injured worker while his condition is moving towards maximum medical improvement.  These programs keep the injured worker conditioned and attached to the workplace and workforce which has long been the recommendation of psychiatric, therapeutic and medical providers.  It appears that this issue will have to be addressed by Illinois legislation as the courts are unsympathetic to this catch-22 for employers.

The Illinois Supreme Court Ruling Expands the Pension Protection Clause to Cover Health Care Benefits

Contributed by Julie Proscia

On July 3, 2014, the Illinois Supreme Court issued its decision in Kanerva v. Weems, 2014 IL 115811, reversing the circuit court’s dismissal of four lawsuits, Bauer v. Weems, No. 12–L–35 (Cir. Ct. Randolph Co.); Kanerva v. Weems, No. 12–L–582 (Cir. Ct. Sangamon Co.); Maag v. Quinn, No. 12–L–162 (Cir. Ct. Sangamon Co.); and McDonal v. Quinn, No. 12–L–987 (Cir. Ct. Madison Co.). One of the claims raised in each of the four cases was the constitutional validity of amendments to the Illinois State Employees Group Insurance Act instituted by the general assembly that impacted the amount retired state employees and their survivors had to contribute for health care benefits. Kanerva v. Weems, 2014 IL 115811

The Circuit Court of Sangamon County had previously dismissed the four consolidated complaints from those cases, in part based on its determination that the Pension Protection Clause of the Illinois Constitution only protected traditional pension benefits and did not encompass the state’s obligations to contribute toward the cost of health care benefits for retired state employees and their survivors. Id.

In reversing the circuit court’s decision the Supreme Court addressed only one of the questions raised on appeal, whether health insurance subsidies are constitutionally protected under the Pension Protection Clause. Id. The Court determined that even though health-care benefits for the public employees in question were controlled and set forth in different statutes, the “eligibility for all of the benefits is limited to, conditioned on and flows directly from membership in one of the State’s various public pension systems.” Id. at  ¶40.  The Court further rationalized that “giving the language of article XIII, section 5, its plain and ordinary meaning, all of these benefits, including subsidized health care, must be considered to be benefits of membership in a pension or retirement system of the State and, therefore, within that provision’s protections.” Id. at ¶40.

In only addressing the question regarding what the Pension Protection Clause covers, the Court refused to address other issues raised on appeal, including contract clause claims and the merits of the Pension Protection Clause claims. As recognized by Justice Burke in her dissent, by not expressing any opinion as to the merits of the Pension Protection Clause claims, contract claims or other claims, there is no clear answer whether they are even viable and either party may still ultimately prevail in those claims. Thus, while the Illinois Supreme Court ruling in Kanerva v. Weems does not completely cut the legs out from under the Illinois General Assembly’s steps towards pension reform, it has increased the likelihood that the General Assembly may have to look to other ways to address the pension problems, including increasing income through taxes.

Additionally, it potentially impacts cities, municipalities and other public entities whose collective bargaining agreements and retirement programs may be subject to the Pension Protection Clause.  If a city, municipality or other public entity has a collective bargaining agreement or retirement program that provides health care benefits to retirees, under the Supreme Court’s decision any modification to current retirees’ health care benefits could potentially be challenged as a violation of the Pension Protection Clause. To address such, cities, municipalities and other public entities should be careful in drafting collective bargaining agreements and other documents in which health care benefits are provided to avoid any presumption that such benefits are guaranteed or would vest for the life of the employee or retiree.

Illinois Supreme Court Denies Review of Fifield . . . Now What?

Contributed by Jeff Glass

The Illinois Supreme Court has declined to review the Fifield decision.  Fifield is the June 2013 case where the Illinois Appellate Court for the First District (Cook County) held that employment at will was not adequate consideration for a restrictive covenant (i.e., non-competes, non-solicitation clauses, etc.)   This was a change in the law since, historically, employers did not have to offer any extra consideration when new hires signed restrictive covenants. 

Under Fifield, employers whose employees had signed restrictive covenants would need to either provide them with consideration like a signing bonus, or hope that they stayed on for two years since Illinois courts have held that the consideration requirement is satisfied by two years of subsequent employment. 

Now that the Illinois Supreme Court has declined to review Fifield, employers face certain realities.  If you are in Cook County, Fifield is controlling law.  Your employees may be emboldened to test the enforceability of their covenants. The most aggressive way to address that risk would be to have employees sign new covenants and provide them with consideration.  That can be expensive.  However, the consideration need not be a cash payment.  There are creative ways to structure consideration such as severance, additional vacation, etc. 

Alternatively, employers can offer consideration only to employees that may do harm if they leave.  That is cheaper but creates its own problems since employees who don’t receive anything will grumble.  This problem can be reduced, but not eliminated, by rolling out bonuses in performance reviews or similar one-on-one settings.  

Another option is to offer nothing and hope that they stay for two years.

In the event you must litigate this issue, you do have arguments.  Although Fifield is being interpreted as altering the rules for new hires, the facts before the court were that: (1) a long term employee’s employer was sold; (2) the new employer “fired” everyone and then re-hired them the next day; but (3) required a non-compete as a condition of re-hire.  It really was analogous to having an existing employee sign a non-compete, which traditionally requires additional consideration or continued employment of two years.  Fifield should be confined to its facts. 

Still further, the cases Fifield cited were not on point and it failed to cite, let alone distinguish, the multitude of cases holding to the contrary. So, if you need to litigate Fifield, it isn’t hopeless.  But you will have an uphill battle. 

If you are not in Cook County, the argument would be that, in addition to the problems just discussed, the First District’s flawed decision should not be binding on the other Districts. Ideally, one of the other Districts will reject Fifield, creating a split among the Districts and giving the Supreme Court another opportunity to take up the issue.

Illinois Supreme Court Decision Gives Employers More Leeway In Demonstrating Enforceability of Non-Compete Agreements

Contributed by Jeff Glass

On December 1, 2011, the Illinois Supreme Court issued a much-anticipated decision that broadened the factors that a court may consider when deciding whether to enforce a non-competition agreement. Reliable Fire Equipment Co. v. Arredondo, et al. (No. 111871) (Dec. 1, 2011). 

Prior to Reliable, a split had developed among the districts of the Illinois Appellate Court as to the “legitimate business interest” test.  It had been long-held in Illinois that, in order to enforce a non-compete contract, an employer must establish a “legitimate business interest” in the form of confidential information or “near-permanent” customer relationships.  The rationale was that this threshold test protected against such contracts being used to merely restrain lawful competition.  Despite that worthy goal, it was a problem for companies who could not show either of these particular interests, but still had good reasons for wanting to enforce the contracts.  Moreover, it was viewed by some as unfair, because it let some employees breach contracts that they voluntarily signed. Due in part to these concerns, the Appellate Court for the Fourth District in 2009 questioned whether a legitimate interest needed to be shown at all (Sunbelt Rentals, Inc. v. Ehlers, 394 Ill.App.3d 421 (2009)).  

Reliable was decided against this backdrop. Reliable sold fire extinguishers and alarms.  It sued two sales agents who signed non-compete contracts and then joined a startup firm.  The trial court declined to enforce the contracts on the grounds that Reliable failed to prove a “legitimate business interest” in the form of confidential information or “near-permanent” customer relationships.  The Appellate Court for the Second District affirmed, in the process rejecting the Fourth District’s opinion in Sunbelt Rentals.

Due to the split among the circuits, the Illinois Supreme Court took the case. It ruled that the legitimate business interest test still applies, but that the test should be expanded to encompass “the totality of the facts and circumstances of the individual case.” Accordingly, it reversed the appellate court’s decision, which limited its analysis to the near-permanence of customer relationships and the employee’s acquisition of confidential information. 

Reliable was a welcome development for me. The case will allow employer’s counsel to draw on a wider range of factors when arguing why non-compete agreements should be enforced. Moreover, a relative weakness in the areas of confidential information and/or near permanent customer relationships is no longer an automatic “deal-breaker” in a case to enforce the contract.  In fact, since Reliable has been decided, my firm has relied on Reliable to obtain a TRO for one client, and also to defeat a motion to dismiss in another non-compete case. Reliable also underscores the importance of reviewing existing employment contracts to make sure they are drafted in a way that will maximize the likelihood of their being enforced in light of the new, employer-friendly standard announced in Reliable.