Illinois made changes to its existing non-compete/non-solicit law (the Illinois Freedom to Work Act) that will go into effect and apply to agreements entered into after January 1, 2022.
For your reference, Reverie has highlighted some of the changes below. Reverie Consultants and Team Members are not attorneys. Therefore, we recommend you consult an attorney to determine how these changes will affect your hiring practices and existing non-compete, non-disclosure agreements.
Changes Going into Effect on January 1, 2022:
Agreement Reserved for Higher Paid Employees:
Employers cannot impose non-compete agreements on employees who earn less than $75,000 per year (set to increase to $80,000 in 2027, $85,000 in 2032, and $90,000 in 2037); and
Employers cannot impose non-solicit agreements on employees who earn less than $45,000 per year (set to increase to $47,500 in 2027, $50,000 in 2032, and $52,500 in 2037).
Enforcement After Layoff or Furlough:
A non-compete or non-solicit agreement entered into after January 1, 2022 is not enforceable against an employee who is terminated, laid off, or furloughed (presumably without cause) “as the result of business circumstances or governmental orders related to the COVID-19 pandemic or under circumstances that are similar to the COVID-19 pandemic,” unless certain post-employment compensation is provided.
Increase In Transparency & Review Period:
Employers are required to advise the employee in writing to consult with an attorney before signing the non-compete or non-solicitation agreement; and
Employers must give the employee a copy of the agreement at least 14 calendar days before their employment is set to begin (or at least 14 days to review the agreement).
Other Notable Clarifications:
The legislature also codified that an employee must be provided with at least two years of employment to support the agreement, absent other valid consideration. However, a shorter period of continued employment can support a restrictive covenant if the employee is also given “additional professional or financial benefits.” The legislature also made clear that “merely professional or financial benefits adequate by themselves” could suffice. This leaves open the possibility that purely financial consideration, or even “professional benefits” like a promotion or increased exposure to customer contacts could feasibly serve as “adequate consideration” in specific circumstances.
The legislature gave explicit authority to the Illinois attorney general to initiate or intervene in a lawsuit to “obtain appropriate relief” when there is “reasonable cause to believe that any person or entity is engaged in a pattern and practice prohibited by this Act.” In doing so, the attorney general is also charged with investigatory powers and the ability to compel compliance with investigative demands/subpoenas. In addition to seeking monetary damages, restitution, and equitable relief, the attorney general can request imposition of civil penalties of $5,000 per violation, or $10,000 for each repeat violation within a five-year period.
For an additional resource regarding these changes, click here.