IL Passes Law Restricting Non-Competes and Non-Solicitation Agreements

On August 13, 2021 Illinois Governor Pritzker signed into law broad restrictions on employee non-competes and non-solicitation agreements. The non-solicit restrictions apply to employer’s customers, as well as other employees.

The new law applies to agreements executed with an employee on or after January 1, 2022. As of that date, the law bans:

  • Non-competes with employees earning $75,000 or less
    • The income threshold increases by $5000 every five years until it reaches $90,000
  • Non-solicitation agreements with employees earning $45,000 or less
    • The income threshold increases by $2500 every five years until it reaches $52,500
  • Non-competes and non-solicitation agreements with an employee who is terminated, laid off, or furloughed due to COVID-19 or “circumstances that are similar to the COVID-19 pandemic”
    • However, a non-compete will be enforceable if the employer includes in the agreement payment to the employee covering the employee’s salary from the date of termination through the period of enforcement minus compensation earned from subsequent employment during that period

In addition, an enforceable non-compete or non-solicitation agreement must:

  • Include a provision advising the employee to consult with an attorney before signing
  • Provide the employee at least 14 days to review the agreement before signing it
  • Offer “professional or financial benefits” or two years of employment as consideration for signing the agreement
    • “Professional or financial benefits” are not defined in the statute but generally include benefits such as a bonus or promotion

Illinois’ new law is part of a national trend to more tightly regulate  the circumstances under which employers can restrict an employee’s  post-termination activities. California bans all non-competes, with limited exceptions, and tightly restricts non-solicitation agreements. Nevada recently enacted legislation banning non-competes with hourly workers. Under Washington law, non-competes are enforceable only if, among other things, the employee earns more than $100,000 per year (adjusted annually). Washington D.C.’s law banning non-competes for virtually all employees will likely become effective some time in 2022. President Biden’s recent Executive Order charging the Federal Trade Commission to explore options to limit the “unfair use” of non-competes also reflects this growing opposition towards these types of agreements.

Employers should work closely with employment law counsel to review  applicable state laws on non-competes and non-solicitation agreements, especially for remote employees working outside of Wisconsin. An advance review may enhance the effectiveness and enforceability of your agreements. See our previous blog on other state law considerations with remote workers.

Lake Effect is here to answer your state and federal employment law and HR questions related to these and other employment agreements. We continue to monitor important legal and HR developments, as well as COVID-related updates from federal, state, and local authorities. Please keep watching our blogs and emails for these important updates, as well as discussions of how compliance meets culture. To dive into these issues, contact us at info@le-hrlaw.com or 1-844-333-5253.

Lake Effect HR & Law, LLC
(844) 333-5253 (LAKE)
info@le-hrlaw.com

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