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Make Sure That You Do NotInadvertently Void YourEmployment Agreements
 Thadord A. Felton
ARNSTEIN & LEHR LLP120 SOUTH RIVERSIDE PLAZA | SUITE 1200CHICAGO, ILLINOIS 60606P 312.876.6934 | F 312.876.0288taelton@arnstein.com
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any companies seek to maintain and protect their competitive edge through the use o employmentagreements. Besides setting orth salary inormation and terms o employment, employmentagreements typically contain various restrictive covenants such as non-competition, non-solicitation andnon-disclosure clauses. However, companies must take care not to “materially breach” the employmentagreement, as such a breach may render the employment agreement, and the restrictive covenants,unenorceable.A recent case involving an employment dispute between two physicians showed the perils o what canhappen when an employer breaches an employment agreement. In that case the physician employerentered into an employment agreement to employ another physician, which provided, among other things,that ater 3 years o ull employment, the physician employee would be oered on option to purchase50% o the employer’s corporation. The employment agreement also contained a restrictive covenant thatprohibited the physician employee rom practicing medicine within a 10 mile radius o the place o businesso his employer or 12 months ater termination o his employment agreement.Ater 3 years o employment, the employer ailed to oer the physician employee the option to acquire50% o the employer’s business. Instead, employer oered to allow the employee to purchase 45% o theemployer’s company and presented him with an “Amended and Restated Employment Agreement.” Thephysician’s employee reused to sign either agreement, but continued to work or his employer. Over thenext ew years, while continuing to work or his employer, the physician employee started his own medicalpractice within the restricted area.When the employer sought to enorce the non-competition clause o the employment agreement, the Courtreused to do so or several reasons: The employment agreement that contained the non-competition clause had expired several years1.beore and had not been renewed. Thus, the physician employee had been working or several yearswithout an employment agreement and without restrictions on competition.Even i the employment agreement had been in eect, the employer had “materially” breached the2.employment agreement by oering the physician employer the opportunity to purchase only 45percent, as opposed to 50 percent, o the corporation.During the same period, the corporation was involuntarily and administratively dissolved by the3.Secretary o State. This decision underscores the need or companies to be cognizant o the risk o breaching agreements with
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