PE non-compete in IL?
Two+ yrs. out of undergrad, started in PE and looking to transition to another PE firm ( MUCH smaller company). I have a 1 yr non-compete and it's pretty generic on geography / scope. Would anyone actually pursue this for someone this junior?
You can get a consult with a state-specific employment lawyer for very little - like, $100 for an hour consult. I'd look into if if you're worried. There's been recent legislation around non-competes in IL that is friendlier to you, but it may not apply given you signed contract before it took effect.
2 year non compete with very broad geography is unusual for a PE associate.. but 2 years is often "reasonable" + within IL is for sure a reasonable geography, so hard to fight legally. Will they actually go after it, I'd say no if you otherwise have done well there and they like you. Try to leave on good terms and be clear this is not a competitor and you don't intend to solicit current connections.
That said the real takeaway here is that this is a good lesson in signing contracts without understanding and agreeing to every provision. I would never sign a contract with a questionable non-compete, would have negotiated that down to a non-solicit or very short garden leave or something more reasonable. Don't just sign contracts without understanding what is going on.
Not a lawyer so take this with a grain of salt, but in most states a non-compete is only legitimate if you’re deemed to be an executive employee of the organization (or something similar). Point of this is to limit organizations ability to limit employee mobility to only those who have meaningful intel on the company’s competitive secrets - in other words, associates generally fall outside of this because you’re just a ppt and excel monkey
I'm not sure what state you're in, but in my experience with non-competes (somewhat limited, but did run into it once) most states do not apply any sort of executive employee test; that's just where it is used in finance. In fact non-competes for fairly entry level staff is common in other industries
For sure any state will scoff at a low-wage, low-skill worker signing a noncompete - think some states have a minimum salary to sign noncompetes - but someone at a PE firm who has pretty significant confidential information, contact info of clients, and is going to a nearby shop in the same industry would check just about every box to qualify for a noncompete as long as it's reasonable in scope
No, it's not standard in the finance industry, but the state is not likely to stand in the way of this just because he's a junior employee
yea i called a labor lawyer and they said the same thing. told me to not waste my money on a lawyer lol
Thanks for your feedback. I didnt have the option to negotiate the contract against a huge first as someone fresh out of college. I was also not going to turn away the offer because of it. The company I am leaving doesnt know where Im applying and I dont intend to let them know (have heard stories of them calling up new employers and talking trash about employees who went there)
Name and shame?
ha no
Have dealt with non-competes a fair amount through my career. Note that every state is unique so you cannot really broadly apply experiences. Some things to note:
1 - If the non-compete is deemed too broad, the court may have the authority to reduce the scope. So just because the non-compete says you cannot work “at any type of investment fund anywhere in the world” doesn’t mean the whole thing will be thrown out. If you’re going to another PE fund that competes for the same types of deals, expect this provision to be relevant.
2 - Generally you need some form of on-going compensation for the non-compete to be enforceable. Meaning they cannot prevent you from working if they aren’t also paying you severance. If the firm isn’t willing to give you severance for the full 12 months of the non-compete, they would probably be unsuccessful in enforcing it. I doubt you have carry / co-invest at your level, but that could potentially be deemed as a substitute for severance.
3 - Realistically you need to be on very bad terms with your prior employer for them to enforce a non-compete on such a junior employee. Some firms would want things such as a non-disparagement or ensure that you won’t go poaching employees / executives / LPs, but I don’t think they would actually attempt to block you from working altogether.
I’d be surprised if you actually have anything to worry about.
got it, appreciate your response! always helpful to get additional thoughts.
I assume non-competes are not valid in California for PE employees (or anyone for that matter), or have you seen exceptions?
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