NON-COMPETES BECOMING MORE DIFFICULT TO ENFORCE IN ILLINOIS
Much to the chagrin of Illinois employers wishing to have their employees enter into enforceable non-competition agreements (“Non-Competes”), enforcing a Non- Compete is becoming more difficult in Illinois. In light of recent Illinois court decisions in this area, greater consideration should be given as to whether a Non-Compete is appropriate for the employer, whether the Non-Compete should apply to all employees (or just certain employees) and the ramifications of seeking enforcement of a Non- Compete. Recent case law in Illinois has made enforcement of Non- Competes more uncertain and, therefore, more difficult. Illinois courts will typically not enforce Non-Competes that are designed simply to prevent competition or the ability of someone to work unless there is a true protectable interest of the employer (e.g., confidential information and/or “near permanent” relationships with the employer’s clients or customers). This often depends on the type of industry involved, since a Non-Compete is rarely enforceable in some types of industries. Therefore, be-fore an employer has all of its employees sign a “cookie-cutter” Non- Compete, it should ask itself (with the advice of legal counsel) whether the Non-Compete will be enforceable if challenged and what the employer will do if it is challenged by the former employee.
Serious consideration should be given by the employer to utilize Non- Competes only in particular industries and only with respect to specific employees who have access to confidential information or have strong relationships with customers/clients. In an industry where a Non-Compete may be difficult to enforce or with respect to employees against whom a Non-Compete may not be enforceable, an employer might want to avoid using a Non- Compete and, instead, use narrowly tailored non-solicitation and confidentiality agreements. This becomes even more important since the recent Court decision in Fifield v. Premier Dealer Ser-vices, Inc. (“Fifield”), in which the First District Illinois Appellate Court held that a Non-Compete for an at-will employee, ancillary to a valid employment agreement, is unenforceable as lacking consideration (unless additional consideration is provided) if the employee leaves within two years, either voluntarily or involuntarily. That court decision leaves Illinois employers with uncertainty since it is not clear what additional consideration is sufficient for the Non- Compete to be enforceable should the employee’s tenure last fewer than 24 months. An employer also may not know for two years whether the Non- Compete even has a chance of being enforceable.
Since Fifield, the enforceability of Non- Competes has been a hot topic -- albeit an uncertain one -- in employment litigation circles. While decisions by the federal courts in Chicago are split on whether to follow the Fifield two-year “bright line test,” and the Illinois Supreme Court has chosen not to weigh in on the matter, the Third District Illinois Appellate Court has recently followed the Fifield decision. Therefore, at the present time, the Fifield decision represents the law of the land in Illinois, and employers should do their best to adapt their practices accordingly. Employers may avoid Fifield by either taking the employee out of the “at will” context (often, an untenable proposition) or provide additional, sufficient consideration for the Non-Compete that is separate from employment. The overall concern for employers stems not only from the Illinois courts’ efforts to impose more burdensome consideration re-quirements upon employers wishing to enforce Non-Competes but from the cloud of uncertainty that now hovers above this rapidly evolving area of law.
By Norman T. Finkel
PROPERTY TAX REASSESSMENTS IN 2015
REASSESSMENT SCHEDULE. Outside of Cook County, real estate in Illinois is reassessed every four years and 2015 is the quadrennial reassessment year. In Cook County, property is reassessed every three years and 2015 is the triennial reassessment year for all townships within the City of Chicago. As a result, most property owners are facing reassessment this year. Taxpayers often do not think about appealing the tax assessment until they receive their tax bill, but by that time it is generally too late. Assessment appeals must typically be filed within 30 days of notice of the current year's assessment. The tax bills received in 2015 represent the 2014 assessment and resulting tax.
TAX CALCULATION. Property tax is the product of the Assessed Value times Equalization Factor times Tax Rate. The Assessed Value is a percentage of the actual fair market value of real estate. Outside of Cook County, the assessed value is one-third of market value. In Cook County, property is classified and the level of assessment depends on property type. For example, residential property is assessed at 10% of market value, while commercial property is assessed at 25% of market value. The Equalization Factor ("Multiplier") is determined by the Illinois Department of Revenue ("IDOR") from transfer tax declarations prepared for real estate closings. IDOR compares sales to assessments and determines a ratio for each jurisdiction. The larger the Multiplier, the bigger the difference between actual sales prices and assessments. The Tax Rate is based on the tax levy of each taxing body. While property values have declined, most tax rates have increased to make up the difference.
ASSESSMENT REVIEWING AGENCIES. In Illinois, counties are divided into townships, each with its own assessor. The Cook County Assessor has established a formal procedure to appeal assessments to its office. Assessors outside of Cook County will review proposed assessments, but only informally. The decision of an assessor can be appealed to the Board of Review in each county. If a taxpayer is dissatisfied with a ruling of the Board of Review, the taxpayer may either appeal to the Illinois Property Tax
Appeal Board or file a lawsuit in the Circuit Court.
UNIFORMITY OF ASSESSMENT. The Assessor is required not only to value property correctly, but consistently. The Illinois Constitution makes it the right of proper-ty owners to have similar properties assessed uniformly. Without regard to mar-ket value, if two homes are similar in features and location, then they should be assessed the same. If a taxpayer is able to show that similar homes have lower assessments than his own, the Assessor may agree to reduce the assessment to match.
VALUATION. The three recognized methods of valuing real estate include comparable sales, income capitaliza-tion and the cost approach. The com-parable sales method requires research of recent sales of similar properties with adjustments in sale price for any signifi-cant differences in features, such as size, age and location. Income capitali-zation is a mathematical means of valu-ing income-producing property that involves division of the net income by a capitalization rate. The cost approach requires an estimate of the cost to con-struct a comparable building. Depend-ing on the type of property, these ap-proaches may be used in combination to determine property value.
EXEMPTIONS. Illinois law provides a va-riety of partial exemptions for qualifying persons owning or renting certain resi-dential property. The most familiar in-clude the General Homestead Exemp-tion, Senior Citizen Exemption, and Sen-ior Citizen Freeze. The greatest concern about exemptions, however, is the need to reapply even if the exemption was previously granted. Oftentimes, homeowners mistakenly believe that an increase in their tax bill is the result of an increase in valuation or tax rate when the real problem is that an exemption has been omitted. Exemptions help reduce tax bills each year. For this reason, it is important to check tax bills to ensure that all of the appropriate exemptions have been included. If exemptions have been omitted, taxpayers can restore most exemptions for up to three prior years.
By G. Terence Nader
Norman T. Finkel
The Firm is pleased to announce that for the second year in a row, Norm Finkel has been chosen by Superlawyers® as one of IIlinois’ top attorneys in the area of business litigation. Superlawyers® is an independent rating service of out-standing lawyers from more than 70 practice areas who have attained a high degree of professional achieve-ment and peer recognition. As head of the firm’s litigation group, Norm, who is also an adjunct professor at Northwest-ern University Law School, brings over 30 years of litigation experience to the Firm’s law practice. [“Superlawyers”® is a registered trademark of Thomson Reu-ters.]
Robert C. Goldberg
Bob Goldberg was recently honored by the Business Technology Association (“BTA”) which is donating $100,000 to the BTA Scholarship Foundation in Bob’s honor. Bob has represented this organi-zation since 1977 as its general counsel. Bob is honored to represent numerous trade associations and foundations in the business equipment, mailing and shipping systems, point-of-sale and payment processing, electronics, and appliance industries.
Schoenberg Finkel Newman & Rosenberg, LLC (312) 648-2300
This newsletter is not intended to be legal or tax advice and is not a substitute for obtaining legal or tax advice. This Newsletter is deemed to be advertising material by the Illinois Supreme Court.