New Law Severely Restricts Non-Compete Agreements in Illinois!

Non-Compete Agreements have been used by Illinois employers for years to restrict employees from going to work for competitors. Under proper circumstances, although viewed as a restraint on an employee’s ability to gain new employment, the Courts would generally uphold such agreements. That is all changing under a new law signed by Governor Pritzker last week. Previously, Illinois had an absolute prohibition on Non-Compete Agreements for low wage workers (those earning less than $13.00 per hour).  The new law will be effective January 1, 2022 and impact only Non-Compete Agreements entered into after that date.

Effective January 1, 2022, an employer may NOT:

  • Require an employee making less than $75,000.00 per year to sign a Non-Compete Agreement; This salary threshold will increase every 5 years by $5,000.00.
  • Require an employee making less than $45,000.00 per year to sign a Non-Solicitation Agreement (restricting the right to hire the former employer’s employees). This salary threshold will increase every 5 years by $2,500.00.
  • Require an employee to enter into a Non-Compete Agreement if the employee lost their job due to the pandemic unless enforcement includes compensation equivalent the employee’s base salary for the period of enforcement.

            In addition, in order any Non-Compete Agreement to be enforceable, it must be supported by “adequate consideration.” What this means is, in the absence of some monetary benefit or professional opportunity/ (i.e. promotion), employers must provide employees with at least two years of continued employment.

            Finally, the new law will require employers to advise employees in writing to consult with an attorney before entering into a Non-Compete Agreement and give employees at least 14 days to have the agreement reviewed.

            This landmark legislation will certainly free up many employees to find new positions, even with a competitor. However, it must be noted that the new law does not apply to Confidentiality Agreements, prohibitions on the disclosure of trade secrets or invention assignment agreements.

            From an employer standpoint, Illinois employers should take several steps now:

  • Consider updating existing agreements and having new ones executed before the law goes into effect on January 1, 2022;
  • For all agreements executed after January 1, 2022, they must be revised to contain the 14 day review period;
  • Given the salary thresholds under the new law, employers should seriously consider which employees truly warrant Non-Compete Agreements or Non-Solicitation Agreement.
  • Finally, employers need to assess the adequacy of consideration provided to employees in exchange for signing.          

            As you can see, there are a number of questions and areas of potential uncertainty brought about by this dramatic change in the ability to restrict an employee’s activities after leaving an employer. We are here to help guide you through these turbulent times.  A law firm that concentrates in employment related matters like ours can help navigate this maze of new laws. With over 37 years’ experience in advising employers and employees on workplace issues, let Boznos Law work with you to ensure you are ready to meet the challenges posed by the changes to the employment laws. Call Bill Boznos today at (630) 375-1958 or contact us at through our website at www.boznoslawoffice.com.  

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