Illinois Prohibits Non-Competition Agreements for Low-Wage Employees

E. Jason Tremblay

E. Jason Tremblay

Governor Bruce Rauner recently signed into law the Illinois Freedom to Work Act (the Act), which will prohibit private sector employers from entering into non-compete agreements with low-wage employees. The Act defines low-wage employees as those who earn the greater of: (a) the Federal ($7.25 per hour), State ($8.25 per hour), or local (currently, $10.50 per hour under the Chicago Minimum Wage Ordinance) minimum wage; or (b) $13.00 per hour.

A covenant not to compete entered into between an employer and a low-wage employee is considered illegal and void under the Act. The Act defines a prohibited “covenant not to compete” as an agreement that would prohibit a low-wage employee from: (a) working for another employer for a specified period of time; (b) working in a specified geographic area; or (c) engaging in similar work for another employer.

Significantly, while the Act prohibits non-compete provisions, it does not affect an employer’s right to protect confidential information and trade secrets or to prohibit the solicitation of otherwise protected relationships through, for example, a non-solicitation provision.

The Illinois Freedom to Work Act is effective January 1, 2017 and allows private litigants to pursue declaratory relief when there is a judiciable controversy over their own non-compete agreement.

This Act follows a lawsuit recently by the Illinois Attorney General involving the sandwich chain Jimmy John’s use of non-competition agreements to prevent lower paid hourly workers from working at competitors of Jimmy John’s, as well as a general trend throughout the country of cases challenging the enforceability of non-compete agreements with low-wage employees.

Should you have any questions regarding the Illinois Freedom to Work Act, please do not hesitate to contact E. Jason Tremblay at 312-876-6676 or your Arnstein & Lehr LLP employment and labor attorney.

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