A "covenant not to solicit" may restrict a former employee from pursuing the employer's other employees or from going after clients, vendors, suppliers and other business relationships, or both. ILAO's tax identification number is 20-2917133. https://www.illinoislegalaid.org/legal-information/can-my-employer-make-me-sign-non-compete-agreement. Employers usually cannot enforce these agreements if they lay off employees for business reasons related to the pandemic. An Illinois non-compete agreement is a restrictive measure taken by employers to prohibit them from working in a similar field after the termination of employment. Only logged-in users can post comments. The Amendment also restricts employers ability to enter into restrictive covenants with employees who are terminated, laid off, or furloughed due to the COVID-19 pandemic or similar circumstances. In Illinois, restrictive covenants have long been subject to close judicial scrutiny due to their impact on the free market economy. In Illinois, if a company grants its employee access to trade secrets or other confidential information, then the company often seeks to use 100 N. Field Dr., Ste. However, for the information to be eligible for protection from a non-compete agreement: It must be economically valuable, and 1. Adequate Consideration Must Support Non-Competes and Non-Solicits, For a non-compete or non-solicit to be enforceable, it must be supported by valid consideration. Agreements where an employee agrees not to reapply for employment to the same employer after termination. She has defended employers in numerous cases in state and federal court, as well as before federal, state, and local administrative agencies in matters of discrimination, retaliation, wrongful termination, whistle-blower actions, and harassment. Mr. Cloutiers practice focuses on all areas of labor and employment law, with an emphasis on employment-related litigation and proactive counseling of management-side clients. Employers should carefully consider these changes in the law and take immediate steps to ensure that employee noncompete and nonsolicitation covenants entered into on or after Jan. 1, 2022, are consistent with the above requirements. The Bill is not retroactive and does not apply to non-compete or non-solicit agreements entered into prior to January 1, 2022. For non-solicits, the threshold will increase as follows: $47,500 in 2027; $50,000 in 2032; and $52,500 in 2037. 1065/2. These are some of the questions we discuss in this article. The rule of thumb is that the agreement can cover any geographic areas in which the employer is currently doing business or imminently intends to begin doing business. As amended, the Freedom to Work Act prohibits non-compete agreements for employees earning $75,000 per year or less. What constitutes adequate consideration has been a subject of much debate in recent years. The Law specifies that the Illinois Attorney General has the authority to initiate or intervene if the Attorney General believes the employer is engaged in a pattern or practice prohibited by the Law, and grants the Attorney General investigative authority and the right to impose remedies and sanctions for those found in violation. Enter your email below for your free estate planning e-book. It is not meant to convey the Firms legal position on behalf of any client, nor is it intended to convey specific legal advice. Primarily, a non-compete agreement must be reasonable in scope. In practice, courts look at three factors to determine whether a non-compete agreement is enforceable: A non-compete agreement must be properly limited in geographic scope in order to be enforceable. New ESG Requirements for Banks that Hold Public Funds May Raise FDA Updates Proposal for Unified Human Foods Program. The Illinois General Assembly recently passed a bill (House Amendment 1 to Senate Bill 672) that significantly amends the Illinois Freedom to Work Act (IFWA), 820 ILCS 90/1 et seq., and impacts the legal landscape for employers who use non-compete and non-solicit covenants in Illinois.It is widely anticipated that Governor Pritzker will sign the bill. The Illinois Freedom to Work Act puts other limits on these agreements. EXCLUSIVE RIGHTS: Intellectual Property Bad Dog? 2022 O'Flaherty Law. Potential Postponement of Enforcement of Final CPRA Regulations. (820 ILCS 90/5. However, non-competes may be used for those workers within construction whose primary duties include management, engineering, architectural design, or sales. New York State Updates its Model Harassment Prevention Toolkit, Illinois Employers: New Noncompete Law Effective Jan. 1, 2022. The Cost Corner: Government Contracts Cost and Pricing DCAA Audits, Louisiana Franchise Tax Phase-Out Vetoed by Governor. Determining whether an agreement is reasonable is done on a case-by-case basis and you should contact an attorney before deciding to leave an employer with which you have a non-compete agreement. A non-compete clause is a contractual term between an employer and a worker that blocks the worker from working for a competing employer, or starting a competing business, typically within a certain geographic area and period of time after the workers employment ends. The purpose of a consultation is to determine whether our firm is a good fit for your legal needs. Currently, under the IFWA, employers are prohibited from entering into non-compete agreements with low-wage employees, defined as those earning $13.00 per hour or less. Minimum Salary Requirements for Non The choice of a lawyer or other professional is an important decision and should not be based solely upon advertisements. Thank you! With amendment of the Illinois Freedom to Work Act, the stakes are even higher for employers. They should feel comfortable leaning on the experience and experience of our attorneys as their counselors and advocates. The definition also includes an agreement that by its terms imposes adverse financial consequences on the former employee if the employee engages in competitive activities after the termination of the employees employment with the employer. Thus, programs such as forfeiture for competition agreements would be covered by the Bill. Importantly, the adequate consideration element is only met if (1) the employee works for the employer for at least two years after the employee signs an agreement containing a covenant not to compete or a covenant not to solicit; (2) the employer provides adequate consideration in the form of a period of employment plus additional professional or financial benefits; or (3) the employer provides professional or financial benefits adequate by themselves. Thank you! Entertaining and educating business content. All health care entities and others using non-competition or non-solicitation agreements in Illinois should be aware of the Law and plan now to make appropriate decisions in light of it. In order to not place undue hardship on the employer, the non-compete agreements must be limited in duration. (adequate consideration). Thomson Reuters Practical Law has released the 2021 update to Non-Compete Laws: Illinois, a Q&A guide to non-compete agreements between employers and employees Specifically, the clause must be reasonable and provide for adequate consideration (more on that below). Noncompete agreements banned for employees making $75,000 per year or less. Some states have laws and ethical rules regarding solicitation and advertisement practices by attorneys and/or other professionals. This week, the New York State Assembly passed a bill that, if signed by Governor Hochul, would ban the use of noncompetition )Because the current minimum wage is $7.25 per hour federally, $8.25 per hour in the state of Illinois, and $13 per hour in the city of Chicago, in practice, the the covenant is not injurious to the public. 2023Illinois Legal Aid Online. We are here to help! Illinois law has certain conditions for non-compete clauses for them to be enforceable. Employee or Independent Contractor? Adequate Consideration: the "Two-Year Rule" or "Professional or Financial Benefits". How can we improve this site? 505Waukegan, IL 60085, 535 Highland Ave., Ste. You may be able to get free legal help. If that kind of non-compete agreement was challenged in court, a judge would likely call it unreasonable and not enforce it. Generally, Illinois courts will only allow or enforce a non-compete agreement if it: 1. is narrowly tailored to promote an employers legitimate business interest; 2. does not impose an undue $75,000 Noncompete Threshold: Employers are prohibited from entering into a covenant not to compete with any employee unless the employees actual or expected Artificial intelligence (AI) is everywherefrom chatbots that answer questions, draft essays and write code, to virtual assistants and self-driving cars. Those who are shareholders, partners, or owners of a company in the construction industry also may be asked to sign non-competes. At any time, if an employee thinks such agreements are unreasonable, they should talk to a lawyer. Worried about doing this on your own? PDF: New York's proposed noncompete ban. Employers need not worry about competitors poaching their most valuable employees to their detriment. Consent Requirements Under Washingtons My Health My Data Act, Supreme Court Upholds Personal Jurisdiction by Corporate Registration. However, a non-compete agreement for 2 years that restricts the employee from doing the same job in the same region as their current job is much more reasonable. Companies should take stock of the new requirements, and continue to ensure their restrictive covenant agreements are appropriately tailored to protect their legitimate business interests without imposing an undue hardship on employees. This amount increases to $80,000 in 2027, $85,000 in 2032, and $90,000 in 2037. AttorneyAdvertising. Help us open opportunities for justice. Global Data Flows and Transfer Mechanisms CIPL Publishes New FAQs Hunton Andrews Kurths Privacy and Cybersecurity. The salary threshold will increase to account for inflation through 2037. Agreements prohibiting the use or disclosure of trade secrets. Sign up now to receive valuable information, advisories and invitations to events on the services and industries of importance to you. We can't give legal advice in the comments, so if you have a question or need legal help, please go to Get Legal Help. The U.K. government has announced a number of measures intended to reform employment laws post-Brexit. Courts may uphold longer non-compete agreements for highly trained employees with very specific knowledge that would be damaging in the hands of a competitor. In this article, we answer the question, "when is a non-compete agreement enforceable in Illinois?" Not so fast. Remember to clear your browser history to hide activity. Bracewell Legal Bites: What Should We Infer from the US Governments New York State Legislature Sends Broad Noncompete Ban to Governors Notice of Proposed Rulemaking: FTC Proposes to Redesign and Immigration Considerations During M&A Transactions [PODCAST]. Similarly, if an employee has learned trade secrets or confidential information, their employer may restrict their freedom to work for a competitor in order to protect this information. All rights reserved. Reliable Fire Equipment Company v. Arredondo (2011), Reliable Fire Equipment v. Arredondo (2011), Prairie Rheumatology Assocs. We speak your language, understand your issues and find commercially viable solutions to help drive business. In addition, the employee must have worked for the employer for a period of at least 2 years or have financial benefits. The Act, originally passed in 2017, outlawed non-compete agreements for low-wage workers, defined as employees earning less than $13/hour or minimum wage. On January 1, 2022, Illinois enacted the Illinois Freedom to Work Act which modified the laws governing non-compete agreements. Lets Go Swimming: Small Disadvantaged Business Growth Targeted by Nonimmigrant Travelers Can Now Board Flights to U.S. Primarily, a non-compete agreement must be reasonable in scope. Previously, non-solicitation provisions, unlike their non-competition counterparts, were not subject to a compensation threshold. The NLR does not wish, nor does it intend, to solicit the business of anyone or to refer anyone to an attorney or other professional.
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