Illinois Enacts Law Limiting Non-Compete and Non-Soliciation Provisions With Employees
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On August 13, 2021, the State of Illinois enacted a law amending the Illinois Freedom To Work Act (the "Law") to limit the use of non-compete and non-solicitation provisions in employment agreements. The new law, which is set to take effect on January 1, 2022, is designed to protect employees from unfair and restrictive employment practices.
Key Provisions of the New Law
The new law places several important limitations on non-compete and non-solicitation agreements in Illinois:
- Non-compete agreements cannot be used if:
- The employee is classified as a non-exempt employee under the Fair Labor Standards Act;
- The employee is less than 18 years of age;
- The agreement is not supported by adequate consideration; or
- The agreement is not reasonably necessary to protect the employer's legitimate business interests.
- Non-solicitation agreements cannot be used if:
- The agreement is not reasonably necessary to protect the employer's legitimate business interests;
- The agreement prohibits the employee from soliciting customers or clients with whom the employee had no contact during the last two years of employment;
- The agreement prohibits the employee from soliciting customers or clients who were not actively solicited by the employee during the last two years of employment; or
- The agreement is not limited to a specific geographic area or time period.
The new law also includes several other provisions that are designed to protect employees, including:
- A requirement that employers provide employees with a copy of the non-compete or non-solicitation agreement before the employee signs it;
- A prohibition on employers from retaliating against employees who refuse to sign non-compete or non-solicitation agreements; and
- A right for employees to file a lawsuit to challenge the validity of non-compete or non-solicitation agreements.
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