Illinois Lawmakers Pass Restrictions on Non-Compete and Non-Solicit Agreements
June 16, 2021
In June 2021, the Illinois House of Representatives and Illinois Senate unanimously voted to amend the Illinois Freedom to Work Act to impose significant restrictions on non-competition and non-solicitation agreements. Governor Pritzker is expected to sign the bill into law and, if so, this amendment will be effective January 1, 2022.
Under the amended Act:
- non-competition agreements for employees making less than $75,000 per year are prohibited;
- customer and coworker non-solicitation agreements are prohibited for employees making less than $45,000 per year;
- employees are now authorized to recover attorneys’ fees and costs if an employee prevails in a lawsuit seeking to enforce these agreements;
- employers must provide employees and potential employees with at least 14 days to review these agreements before signing;
- the agreement must specifically state in writing that the employee or potential employee has the right to consult with an attorney before signing;
- employers are prohibited from enforcing non-competition or non-solicitation agreements against employees laid off due to COVID-19 (or similar circumstances) unless the employer pays the equivalent of the employee’s base salary during the restrictive period; and
- the Attorney General can investigate and litigate potential violations and intervene in existing litigation involving these agreements.
Additionally, the Act clarifies the following:
- for these agreements to be enforceable, employees must work for the employer for at least 2 years after signing or receive monetary consideration beyond their regular compensation at the time of signing;
- these agreements are only enforceable to protect the legitimate business interest of an employer and the enforceability will be based on the totality of the circumstances (type of information protected, employee’s access to customers, etc.); and
- courts are permitted to reform these agreements at their discretion (otherwise known as “blue-penciling”).
Even though this new law is anticipated to become effective January 1, 2021, businesses should review their current employment agreements with employment counsel. If you have any questions, please do not hesitate to contact Ashley L. Orler, Brianna Golan (312.696.2636) or any of the attorneys in GCT’s Employment Practice Group.