Effective January 1, 2022, the new amendment to the Illinois Freedom to Work Act (the “Act”) changes the use of non-competition and non-solicitation restrictive covenants. Illinois employers should familiarize themselves with these changes to ensure that their restrictive covenants comply with the new law. This article highlights key changes to the Act.
1. The Salary Threshold
Employees who earn $75,000 per year or less cannot enter into non-compete agreements, and employees who earn less than $45,000 per year cannot enter into non-solicit agreements. The minimum salary threshold will increase by $5,000 in 2027, 2032, and 2037.
2. The Requirements for Enforceability
Non-solicit and non-compete agreements are illegal and unenforceable, unless:
The covenant is no greater than required for the protection of the employer’s legitimate business interest,
The covenant does not impose an undue hardship on the employee,
The covenant is ancillary to a valid employment agreement,
The employee receives adequate consideration in exchange for the covenant, and
The covenant is not injurious to the public.
3. The COVID-related Restriction
Employers cannot enter into non-compete or non-solicitation agreements with an employee terminated, furloughed, or laid off for reasons related to the COVID-19 pandemic. However, this restriction does not apply if the employee receives compensation equivalent to their salary base at the time of termination for the period of the agreement’s enforcement, which cannot include compensation earned from subsequent employment.
4. The Notice Requirement
Employers must advise employees to consult with an attorney before entering into a non-solicit or non-compete agreement. Employees must also be provided with at least 14 days to review the agreement before signing.
5. The Employer’s Consequence for Noncompliance
If an employee prevails on a claim to enforce a non-solicit or non-compete agreement, the employer must pay the employee’s attorneys’ fees and costs. In addition, if an employer has a pattern or practice of violating the Act, they may be subject to an investigation by the Illinois Attorney General who may take legal action against the employer that can lead to civil penalties of $5,000 per violation or $10,000 for each repeated violation within the following five years.
KS Law is committed to assisting Illinois employers to ensure compliance with rapidly changing employment laws. Contact KS Law today if you need assistance updating your current non-competition and non-solicitation restrictive covenants.