Ryan Cowdin
Tue, 02/01/2022
As Illinois rang in the new year, amendments to the Illinois Freedom to Work Act (IFWA) passed in SB 672 took effect. The changes substantially restrict (prospectively from January 1, 2022) the use of non-compete and non-solicitation agreements by Illinois employers. Non-compete agreements preclude former employees from entering into competition with an employer, while non-solicitation agreements preclude former employees from soliciting the customer base of their employers. Both are typically limited to a particular period of time or geographic area.
The changed expand the prohibition on non-competes to employees who make less than $75,000 annually and exempt employees making less than $45,000 annually from employer requirements to enter into non-solicitation agreements. Previously, employers were only prohibited from making “low-wage employees” (those making the greater of the applicable minimum wage or $13.00 per hour) sign such agreements. In addition, the law was unclear as to whether any restrictions in the IFWA applied to non-solicitation agreements. Now, the IFWA clearly protects all but well-paid employees and applies unambiguously to both types of agreements.
Employers seeking to use these agreements must also comply with the newly codified substantive and procedural requirements included in SB 672. First, these agreements must have “adequate consideration,” meaning an employee must either have worked for the employer for at least two years after signing the agreement or the employer must have provided independently adequate “professional or financial benefits.” Second, the agreements must be supported by a “legitimate business interest,” which is determined by the totality of the circumstances, but will focus on factors demonstrating that the agreement is properly tailored to protect the employer’s business, such as the time, place, and scope of the restrictions, and the extent of exposure the employee had to customers and confidential information. Procedurally, employers must (1) counsel employees to consult with an attorney prior to signing a non-compete or non-solicit and (2) provide the employee 14 days to consider the agreement before signing.
Finally, the includes new tools for enforcement of its provisions. Courts are empowered to revise or sever provisions within the agreements to ensure they remain fair and enforceable. The Illinois Attorney General has the authority to investigate and sue employers who violate the Act. Most importantly, the law now provides for shifting the employee’s attorneys’ fees and costs to the employer where an employer unsuccessfully attempts to enforce the agreement in court. It does not permit fee-shifting in the reverse, i.e., against the employee who loses the enforcement lawsuit.
