Detroit & Chicago Business Organizations Legal Blog

Consumers in Illinois and Michigan have concerns about the rising costs of prescription medications. According to the Wall Street Journal, these concerns have put pressure on drug manufacturers, pharmacies, and the middlemen between them known as pharmacy benefit managers to lower the costs.

The heightened tensions erupted in a dispute earlier this month between Caremark, a PBM associated with CVS Health, and Wal-Mart, with the retail giant threatening to rescind its participation in Caremark's prescription drug coverage. This move had to potential to affect participants in Caremark plans as they would have to pay full price to get prescription medications filled at Wal-Mart pharmacies. This would have particularly affected consumers in more rural areas in which Wal-Mart is one of the few, or in some cases the only, pharmacy in the vicinity to participate in Caremark.

Companies that do business with local municipal governments might assume that these entities would want to support operations in their cities or states. While certainly this can happen, there may be a variety of factors that go into a city council's decision to award a contract to a vendor from outside the area. In one recent situation involving this type of decision, the local company is pushing to have the contract award reviewed and reconsidered.

At issue is a contract that would allow one company to haul coal for a period of three years. As reported by Transport Topics, the city of East St. Louis opened up bids to the incumbent and one other vendor to bring in coal for the City Water, Light and Power department. The incumbent is a company from Georgia and the other vendor is based in Illinois. 

Your company's intellectual property, trade secrets and proprietary content and procedures are vital to its success. Protecting such sensitive information is paramount, even if it means requesting that any new personnel that you bring in to your business in Chicago signs a non-compete agreement. In general, such agreements place certain limitations on what an employee can and cannot do in relation to your business once they have left. The question is whether or not such agreements are enforceable. 

Illinois does indeed have statutes that address non-compete agreements, yet they are limited in scope. According to the American Association of Corporate Counsel, Illinois' Freedom to Work Act on expressly prohibits non-compete agreements when made between an employer and low-wage employees. Specifically, an employer cannot attempt to prohibit a low-wage employee from: 

• Going to work for another company for any pre-determined time period
• Securing new employment in a specific geographic area
• Simultaneously work for another company that operates in the same industry 

Most of those who deal contractually in Detroit and Chicago likely do so assuming that the only way their contractual partners can terminate their agreements is if they have legitimate cause to do so (after all, how valid can an agreement be if one side can walk away from it at any time?). Yet there are scenarios where a contracted partner can indeed end an agreement for its convenience. The trick to avoid getting caught up in such a scenario is knowing what situations the right to terminate for convenience applies to. 

Typically, this privilege is extended automatically to government entities. Indeed, the Code of Federal Regulations shows that the right to terminate all or part of a contract due to it not being in an agency's best interest is inherent. In the event that a government entity does end an agreement in this way, its contracted partner only has the right to collect payment for whatever services it had already rendered, as well as the costs associated with ending its work.