On January 1, 2017, a new law regulating the use of non-compete agreements between hourly employees and employers took effect. The Illinois Freedom to Work Act (the “Act”) prohibits private employers from requiring “low-wage employees” to sign non-compete agreements. The Act applies to all agreements entered into by the parties after January 1, 2017. Any such, which violates the Act, will be considered to be “illegal and void” and the courts will refuse to enforce it. However, the Act does not apply retroactively; it does not apply to any agreement entered into before January 1, 2017.
The Act defines a “low wage employee” as “an employee who earns the greater of (1) the hourly rate equal to the minimum wage required by the applicable federal, State, or local minimum wage law or (2) $13.00 per hour.” Given the current minimum wage requirements in Illinois, the Act will apply to any employee who is earning $13.00 per hour or below.
The Act defines a non-compete agreement or a “covenant not to compete” as an agreement between an employer and a low-wage employee that restricts (or prohibits) the employee from performing:
- Any work for another employer for a specified period of time;
- Any work in a specific geographical area; or
- Work for another employer that is similar to the low-wage employee’s work for the employer (who is included as a party to the non-compete agreement)
The purpose of the Act is to ensure the mobility of low-wage workers and to prevent the potential abuse of non-compete agreements. It is seen by many as the next step by Illinois following the Fifield v. Premier Dealership Servs., 2013 IL App. (1st) 120327, 933 N.E. 2d 938 (Ill. App. Ct. 2013) which analyzed the consideration required for restrictive covenants in employment agreements.
At this time, it appears that the Act only applies to non-compete clauses and does not apply to non-disclosure or confidentiality agreements created to protect an employer’s confidential information or to non-solicitation agreements which prohibit employees from soliciting an employer’s customers or employees. However, the courts may still interpret the Act to have far-reaching implications, including applying to non-disclosure and non-solicitation agreements, so it advised that employers act cautiously when using such agreements with low-wage employees.
It is important that employers carefully consider the use of any restrictive covenants, including non-compete agreements, regardless of the type of employee. It is important to occasionally review the restrictive covenants being used in your business to confirm that they are tied to legitimate business interests, are drafted in a reasonable and narrowly tailored manner and are supported by sufficient consideration.
If you are considering including restrictive covenants into your current employment agreements, wish to update the restrictive covenants in your current agreements or anticipating signing an employment agreement which may contain restrictive covenants, it is strongly recommended that you speak to an attorney to confirm that the restrictive covenants are in compliance with the current laws.
Should you have any questions about restrictive covenants or how they can affect you or your business, or would like to schedule a free initial consultation, please contact Waltz, Palmer & Dawson, LLC at (847)253-8800 or contact us online.
Waltz, Palmer & Dawson, LLC is a full-service law firm with various areas of service to assist your business, including: Employment Law, Intellectual Property, Commercial Real Estate, Business Immigration, Litigation and general Business Law services. Individual services include Estate Planning, Wills and Trusts, Probate, Guardianship, Divorce and Family Law.
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