Non-Compete Agreements Post Illinois Freedom To Work Act
The Illinois Freedom to Work Act, effective January 1, 2022, has significantly changed the landscape of non-compete agreements in the state of Illinois. Employers now face stricter guidelines when drafting and enforcing non-compete agreements. The Illinois Freedom to Work Act gives employees additional protections against overly restrictive non-compete agreement terms. At Keller Law Group, we frequently advise employers on navigating these changes to ensure compliance with the law. Understanding the new legal framework is critical for anyone involved in a non-compete agreement.
The Act limits the enforceability of non-compete and non-solicitation agreements, ensuring they are reasonable and not used to restrict an employee’s ability to work unfairly. Illinois law, under the Illinois Freedom to Work Act (820 ILCS 90), now requires employers to meet specific conditions for these agreements to be valid. The law particularly impacts employees earning lower wages and introduces additional requirements for consideration, notice, and fairness.
Key Changes Under The Illinois Freedom To Work Act
1. Income Thresholds For Non-Compete Agreements
Non-compete agreements are not enforceable for employees who earn less than $75,000 annually. This threshold will increase every five years until reaching $90,000 in 2037. These provisions will prevent employers from using non-competes to restrict lower-income workers unfairly.
2. Income Thresholds For Non-Solicitation Agreements
Non-solicitation agreements are not enforceable for employees who earn less than $45,000 per year. There will be incremental increases until the threshold reaches $52,500 in 2037. These thresholds protect employees who lack bargaining power in their employment contracts.
3. Reasonableness Requirements
For a non-compete or non-solicitation agreement to be enforceable, it must be narrowly tailored in scope, duration, and geographic area. Illinois courts assess whether the agreement protects a legitimate business interest without imposing undue hardship on the employee or harming the public.
4. Adequate Consideration
Employers must provide adequate consideration to employees in exchange for signing a restrictive covenant. Under Illinois law, adequate consideration means at least two years of employment or other substantial benefits, such as bonuses or promotions.
5. Mandatory Review Period
Employers must give employees at least 14 days to review a non-compete or non-solicitation agreement before signing. This makes sure that employees have sufficient time to understand the terms and seek legal counsel if necessary.
6. Attorney General Enforcement
In Illinois, the Illinois Attorney General has the authority to investigate and file lawsuits against employers that violate the Freedom To Work Act. This enforcement mechanism ensures compliance and provides additional protection for employees.
Illinois Non-Compete Agreement Frequently Asked Questions
What Is The Difference Between A Non-Compete And A Non-Solicitation Agreement?
A non-compete agreement restricts an employee from working for a competitor or starting a competing business within a specific time frame and geographic area. A non-solicitation agreement prevents an employee from soliciting the employer’s customers, clients, or employees after leaving the company.
How Does The Illinois Freedom To Work Act Impact Small Businesses?
The Act ensures that small businesses use non-compete and non-solicitation agreements appropriately. While it limits restrictions on lower-wage employees, it still allows businesses to protect legitimate interests, such as trade secrets and customer relationships, when agreements meet legal standards.
Are Non-Compete Agreements Signed Before January 1, 2022, Still Enforceable?
Yes, non-compete agreements signed before January 1, 2022, are governed by the laws in place at the time of signing. However, employers should review older agreements to ensure they remain reasonable and enforceable under current judicial interpretations.
What Happens If A Non-Compete Agreement Is Found To Be Unenforceable?
If a court finds a non-compete agreement unenforceable, it may modify the agreement to make it reasonable or strike it entirely. Employers should ensure agreements comply with the Act to avoid costly legal disputes.
Can Independent Contractors Be Subject To Non-Compete Agreements Under Illinois Law?
The Illinois Freedom to Work Act does not explicitly address independent contractors. However, courts generally apply similar standards of reasonableness to restrictive covenants involving contractors, particularly when income thresholds and legitimate business interests are at issue.
How Does The Act Affect Existing Employees Who Are Asked To Sign New Non-Compete Agreements?
Existing employees must receive adequate consideration, such as bonuses, promotions, or continued employment, to sign a new non-compete agreement. Employers must also comply with the 14-day review period requirement.
Call Our DuPage County Non-Compete Agreement Attorney For Legal Help
The Illinois Freedom to Work Act has reshaped how businesses and employees approach non-compete agreements. At Keller Law Group, LLC, we are committed to helping employers draft compliant agreements and assisting employees in understanding their rights under the law. Whether you need guidance on a new agreement or want to challenge an existing one, we are here to help.
Contact our DuPage County non-compete agreement attorney at Keller Law Group by calling 630-868-3093 to receive an initial consultation. With offices serving Chicago and all of Illinois, we provide personalized legal solutions to protect your interests and ensure compliance with state law. Let’s work together to address your non-compete agreement needs effectively.