Restrictive Covenants Unreasonable

Plaintiff-employer sued former employees for breaching their restrictive covenants. Instant Technology LLC v. DeFazio, Nos. 14-2132 & 14-2243 Cons. (7th Cir. July 14, 2015). The former employees had agreed not to (1) solicit business from Instant’s clients, (2) not to recruit Instant’s employees to other jobs, and (3) not to disclose the firm’s sensitive information to outsiders. After a bench trial, the District Court found, that the former employees of plaintiff did not breach terms of restrictive covenants. The Seventh Circuit affirmed.

The Seventh Circuit held that the Plaintiff failed to establish that the Defendants accessed Plaintiff's proprietary information about its clients after they were fired.

Furthermore, while the Defendants admitted to breaching their covenants not to solicit their former employer's staff or recruit its clients, the District Court could properly find that those covenants were unreasonable, as the record showed that: (1) tech-staffing firms generally do not build relationships with its clients; (2) information about those clients could be found in other public forums; and (3) the plaintiff could not rely on its interest in a "stable workforce" to justify covenant not to recruit.