The Illinois Freedom to Work Act: New Illinois Law Outlaws Non-Compete Agreements With Low-Wage Employees

Illinois law governing restrictive covenants in employment agreements has undergone a number of changes in the past few years.  The latest development is the Illinois Freedom to Work Act, which prohibits employers from entering into non-compete agreements with low-wage employees.  The Act was passed by the Illinois legislature earlier this year and goes into effect on January 1, 2017.  S.B.3163, Public Act 099-0860.

Section 10 of the Act provides that “[n]o employer shall enter into a covenant not to compete with any low-wage employee of the employer.”  The Act further states that a non-compete agreement with a low-wage employee is illegal and void. Any agreement entered into on or after January 1, 2017 is subject to the Act.

The Act broadly defines “covenant not to compete” as any agreement that restricts a low-wage employee from performing “(A) any work for another employer for a specified period of time; (B) any work in a specified geographical area; or (C) work for another employer that is similar to such low-wage employee’s work for the employer included as a party to the agreement.”  Notably, the Act does not distinguish between pre- or post-termination restrictive covenants.

The law applies only to non-compete agreements with “low-wage employees,” which the Act defines as employees who earn the greater of (1) the minimum wage required by federal, state, or local law, or (2) $13.00 per hour. 

Illinois employers should review their existing non-compete agreements, and update their personnel policies to ensure compliance with this new statute.  In particular, employers should reconsider the use of blanket policies requiring all employees to sign non-compete agreements as a condition of employment. 

Questions regarding the Illinois Freedom to Work Act or other employment-related issues, can be directed to Matt Tyrrell at (312) 648-2300 or matthew.tyrrell@sfnr.com