Company’s Confidential Information Provisions Are Re-evaluated

March 1, 2012

In our Winter 2012 newsletter, we discussed the groundbreaking Illinois Supreme Court opinion in Reliable Fire Equipment Company v. Arrendendo, which changed the landscape for employers looking to enforce restrictive covenants (often called non-compete and non-solicit provisions). Other courts – both state appellate and local federal courts – have begun weighing in on this case and how it will be applied on a practical level.

The first case to publish its ruling is Rubloff Development Group, Inc. v. SuperValu, Inc. On March 27, 2012, the federal court in Chicago used the analysis in Reliable Fire to support its conclusion that the confidentiality restriction in a former employee’s employment contract was too broad and thus unenforceable.

“[P]ost-employment restrictive covenants that insist on absolute secrecy of any and all information [are] unreasonable and unenforceable because a person is allowed to make a living, and cannot possibly not utilize any information from his past job.” The court then used the totality-of-the- circumstances standard explained in Reliable Fire to determine that the employer had gone too far in trying to prevent its former employee from disclosing “any and all information” learned from his employer.

The new case emphasizes that all restrictions – even confidentiality restrictions – must be narrowly tailored to protect only the information that is really necessary for an employee to keep secret. This standard will likely be applied to confidentiality provisions in other contexts too, such as Non-Disclosure Agreements between businesses.

Take away: Trying to over-reach and protect information that is not really confidential may result in a court refusing to enforce a confidentiality agreement at all. To be enforceable, confidentiality provisions must be customized to cover only what is reasonable. Contact Laura A. Balson or Margaret A. Gisch to discuss whether the confidentiality provisions in your company’s contracts need to be reviewed in light of this change in the law.