Employment Contract Disputes Counsel for Employers and Executives
Noncompetes, nonsolicits, and departing key employees. These fights are decided by drafting choices made years before anyone called a lawyer.
Employment contract disputes are won and lost on paperwork signed long before anyone called a lawyer. When a key employee resigns on Friday and turns up at a competitor on Monday, the question is rarely whether the departure feels unfair. It is whether the covenant that was supposed to prevent it was drafted to survive the statute that governs it, and whether the employer followed the procedural steps that statute requires.
That question got harder to answer in 2026. The Federal Trade Commission’s nationwide noncompete ban was set aside in Ryan, LLC v. FTC, 746 F. Supp. 3d 369 (N.D. Tex. 2024), and formally removed from the Code of Federal Regulations on February 12, 2026. Enforceability is once again a state-by-state question, and the states have not converged. Illinois voids any noncompete signed by a worker earning $75,000 or less. Wisconsin voids the entire covenant if any part of it is unreasonable, with no authority to salvage the reasonable portion. A form agreement pulled from a template folder can be fully enforceable in one state and worthless in the next.
Howard East represents both sides of the exit: employers protecting a book of business, and executives negotiating their way out of one. What follows is how these disputes actually work, the law that governs them after the FTC rule, the diligence that surfaces problems before they become filings, and the clauses that decide the outcome.
Employment Contract Disputes: Fundamentals and Real Economics
Most restrictive covenant fights follow the same arc. An employer discovers a departure, sends a cease-and-desist letter, and either moves for a temporary restraining order within days or loses the leverage that urgency provides. The employee is usually between jobs or newly employed and cannot fund a long fight. The practical result is that these cases are decided at the preliminary injunction stage on an expedited record, months before anyone reaches meaningful discovery. The strength of the document, not the strength of the story, controls.
The cost asymmetry is the part employers underestimate. Illinois shifts fees in one direction only. Under section 25 of the Illinois Freedom to Work Act, an employee who defeats a claim to enforce a noncompete or a nonsolicit recovers all costs and reasonable attorney’s fees from the employer. There is no reciprocal provision running the other way. An employer who sues on an overbroad covenant in Illinois is not merely likely to lose; it is funding the other side’s defense.
- Injunction practice, not trial practice. Motions are briefed and heard within weeks, largely on affidavits rather than live testimony.
- One-way fee shifting. Illinois awards fees to prevailing employees only, which converts a weak enforcement case into an affirmative liability.
- Attorney General exposure. The Illinois Attorney General may seek civil penalties up to $5,000 per violation and $10,000 per repeat violation within five years, counted separately for each affected worker.
- Operational disruption. Customers, referral sources, and the employees who stayed all watch how a departure is handled.
- Insurance gaps. Employment practices liability policies rarely fund an employer’s own affirmative enforcement suit.
- Deal contamination. Unenforceable covenants surface in diligence and get repriced, escrowed, or carved out of an eventual sale.
Price the downside of losing before the demand letter goes out, not after the response arrives.
Legal Structures: The Five Restrictive Covenants
Noncompete is shorthand for a family of restraints that courts treat very differently. Illinois defines the categories by statute, and the definitions matter because the earnings thresholds, carve-outs, and consideration rules attach to the label a court applies rather than the heading in the contract. A provision that operates like a noncompete will be analyzed as one even if it is titled a nondisclosure clause.
Wisconsin makes the same point from the other direction. In Manitowoc Co. v. Lanning, 2018 WI 6, the Wisconsin Supreme Court held that a clause barring a former employee from soliciting any employee of the company was a restraint of trade governed by the state’s restrictive covenant statute, and unenforceable because it reached employees the departing worker had never met. Drafting to the wrong category is among the most common ways a covenant fails. Getting the instrument right is a contract drafting question before it is ever a litigation question.
- Covenant not to compete. Bars work for a competitor. In Illinois it requires annualized earnings above $75,000, rising to $80,000 on January 1, 2027.
- Covenant not to solicit customers. Bars pursuit of the employer’s clients, prospects, and vendors. The Illinois threshold is $45,000, rising to $47,500 on January 1, 2027.
- Covenant not to solicit employees. The antipoaching restraint at issue in Lanning. Narrower is safer, and blanket “any employee” language is a documented failure point.
- Confidentiality and trade secret covenants. Expressly excluded from the Illinois statute’s definition of a noncompete, and often the most durable protection an employer actually holds.
- Invention assignment agreements. Also carved out, and the right tool when the real concern is work product rather than mobility.
- Sale-of-business and garden-leave provisions. Covenants tied to selling goodwill, and paid notice periods where the employee stays on payroll, sit outside the employment restraint rules and are enforced far more readily.
Match the restraint to the interest you are actually protecting. The broader instrument is usually the weaker one.
Regulatory Landscape After the FTC Noncompete Rule
The FTC published its Non-Compete Clause Rule at 89 FR 38342 on May 7, 2024, with a September 4, 2024 effective date. A federal district court in Texas set it aside in Ryan, LLC v. FTC, holding that the Commission had exceeded its statutory authority and that the rule was arbitrary and capricious. On September 5, 2025 the Commission voted 3-1 to dismiss its appeals in the Fifth and Eleventh Circuits and accede to the vacatur. On February 12, 2026 it removed 16 CFR Part 910 from the Code of Federal Regulations (91 FR 6507). There is no federal noncompete ban.
That is not the same as federal indifference. The Commission has shifted from rulemaking to case-by-case enforcement under Section 5 of the FTC Act. On April 15, 2026 it ordered Rollins, Inc., the parent of Orkin, HomeTeam, and Critter Control, to stop enforcing noncompetes against more than 18,000 workers. The complaint alleged two-year restrictions within a 75-mile radius imposed on technicians and customer-service representatives who could not negotiate, received no separate consideration, and had little opportunity to understand what they were signing. The Commission sent warning letters to 13 other pest-control employers the same day. Blanket covenants applied uniformly across a workforce remain a federal enforcement target even though the rule is gone.
- No federal ban. Part 910 was removed and reserved effective February 12, 2026.
- Section 5 enforcement continues. Consent orders can run ten years and require affirmative notice to current and former employees that their covenants will not be enforced.
- Scope discipline is now a federal issue. Uniform application, absence of separate consideration, and no meaningful review period were the facts the Rollins complaint emphasized.
- State statutes govern the merits. Illinois and Wisconsin take opposite approaches to salvaging an overbroad covenant.
- Sector carve-outs keep expanding. Illinois voids these covenants for construction workers, and since January 1, 2025 for licensed mental health professionals where enforcement would raise cost or difficulty for veterans and first responders seeking care.
- Choice-of-law clauses are not an escape hatch. A protective home-state statute frequently overrides a friendlier contractual forum.
Federal law no longer decides these cases, but it can still cost an employer the ability to enforce.
Due Diligence and Risk Areas Before You Enforce
The most expensive mistake in this practice area is sending a demand letter before reading the personnel file. Enforceability in Illinois turns on procedural steps taken at signing, and those steps were either documented or they were not. A covenant is illegal and void unless the employer advised the employee in writing to consult an attorney before signing, and gave the employee a copy at least 14 calendar days before employment began or at least 14 calendar days to review it. Neither requirement can be cured after the fact.
Consideration is the second trap, and it is where neighboring states diverge sharply. Illinois defines adequate consideration as at least two years of employment after signing, or professional and financial benefits sufficient on their own. Wisconsin reached a different answer in Runzheimer International, Ltd. v. Friedlen, 2015 WI 45, holding that an employer’s forbearance from terminating an at-will employee is lawful consideration for a covenant signed mid-employment. Same fact pattern, opposite result, decided entirely by which side of the state line the employee worked on. Our guide to Illinois noncompete rules walks through the Illinois requirements in more detail.
- Signing file. Locate the written attorney-consultation advisory and proof of the 14-day review window.
- Earnings verification. Measure W-2 wages plus elective deferrals against the threshold in effect when the covenant was signed, not today’s number.
- Consideration. Confirm two years of post-signing employment, or documented additional compensation given for the covenant itself.
- Category check. Determine whether the worker falls into a statutory carve-out such as construction or covered mental health practice.
- Scope audit. Test whether the geographic and activity restrictions track a legitimate business interest under the totality-of-the-circumstances standard the statute prescribes.
- Trade secret alternative. Ask whether a cleaner claim exists under the Defend Trade Secrets Act or state trade secret law that does not depend on the covenant at all.
Run this checklist before the demand letter, not after the motion to dismiss.
Key Contract Provisions That Decide These Cases
Reformation is the provision most employers assume they have and most do not. Illinois permits a court to reform or sever an overbroad covenant, but the statute cautions that extensive judicial rewriting may itself be against public policy and directs courts to weigh whether the original restraint was a good-faith effort to protect a legitimate interest. Wisconsin removes the option entirely. Under Wis. Stat. section 103.465, a covenant imposing an unreasonable restraint is illegal, void, and unenforceable even as to any part of it that would have been a reasonable restraint.
That single sentence changes how a Wisconsin agreement should be drafted. Because the whole covenant falls with any unreasonable piece, and because Star Direct, Inc. v. Dal Pra, 2009 WI 76, ties divisibility to whether provisions can be read and enforced independently, the safe structure is a set of separate, self-contained covenants rather than one intertwined restraint full of cross-references.
- Duration and territory. Tie the restricted area to actual customer relationships. A Wisconsin covenant with no specified territory is void outright.
- Severability and divisibility. Draft each restraint to stand alone, without textual cross-references that make the set indivisible.
- Definition of confidential information. Sweeping definitions that capture publicly available information invite a court to treat the clause as a disguised noncompete. See our note on defining confidential information.
- Consideration recital. State what the employee actually received, and time the signing to the governing state’s requirements.
- Tolling and extension clauses. A provision extending the restricted period by any period of violation was held unreasonable and voided the entire clause in H&R Block Eastern Enterprises, Inc. v. Swenson, 2008 WI App 3.
- Forfeiture-for-competition provisions. Benefit forfeitures triggered by competing are analyzed as restrictive covenants, not as neutral compensation terms.
The clause that rescues a covenant in Illinois can be the clause that destroys it in Wisconsin.
Howard East Employment Contract Dispute Services
Howard East handles restrictive covenant work from both chairs. For employers, that means auditing agreements before there is a dispute and building a covenant program that matches the workforce, rather than papering every hire with the same form. For executives and key employees, it means reading the agreement against the governing statute before a resignation letter goes out, while there are still options on the table.
Most of this work is preventive and is billed hourly. Related reading includes our practical treatment of why Wisconsin noncompetes are not dead despite the state’s unforgiving statute, and our discussion of partnership dispute strategy for exits that involve ownership as well as employment.
- Covenant audits. Reviewing existing agreements against current earnings thresholds, carve-outs, and procedural requirements.
- Enforcement assessment. A candid read on whether a covenant survives a preliminary injunction hearing, delivered before you commit to filing.
- Executive exit counseling. Negotiating releases, carve-outs, and narrowed restrictions ahead of a resignation.
- Multistate program design. Separate agreement sets for jurisdictions whose rules cannot be reconciled in one document.
- Trade secret and confidentiality strategy. Protecting information in situations where a mobility restraint would not hold.
- Litigation coordination. Matters requiring court intervention are handled with Howard Law Group’s commercial litigation team, whose attorneys are admitted in Illinois, New York, and Missouri.
If you are weighing an enforcement decision or a departure, a short consultation is usually enough to tell you which way the statute points.
Why Legal Counsel Matters in Employment Contract Disputes
These disputes reward preparation and punish improvisation. The employer that documented its 14-day review window, gave the written attorney advisory, and tailored its covenants to real customer relationships walks into an injunction hearing with a document that does the work. The employer that copied a form and applied it to everyone from the sales director to the front desk walks in with a covenant that is void by statute and a fee-shifting exposure stacked on top of it.
The asymmetry runs the other way for employees. Executives routinely sign restrictions that are unenforceable where they live and then behave as though they are bound, declining opportunities no court would have blocked. Reading the agreement against the statute that governs it costs a fraction of what either mistake costs.
- The law moved recently and is still moving. A covenant signed in 2021 may be governed differently today.
- Enforceability is jurisdictional. The state where the employee actually works usually controls, whatever the contract says.
- Procedural defects are fatal and uncurable. No amount of good faith repairs a missing written advisory.
- Timing drives leverage. Options narrow sharply once a resignation is delivered or a complaint is filed.
- Fee shifting changes the filing decision. In Illinois, a marginal enforcement case is an affirmative risk.
- Adjacent claims matter. Trade secret, fiduciary duty, and ownership claims often outlast the covenant itself.
This page is general information about employment contract disputes, not legal advice, and it does not create an attorney-client relationship.
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