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Publication

November 22, 2016Client Alert

Illinois Employers’ Ability to Have Non-Competes with Low-Wage Workers Ends

The Illinois Freedom to Work Act, effective January 1, 2017, bars employers from entering into covenants not to compete with any employee that earns the greater of $13.00 per hour or the applicable hourly federal, state, or local minimum wage or less.

The Act covers agreements between employers and low-wage employees that restrict low-wage employees from performing:

  1. Work for another employer for a specified period of time;
  2. Any work in a specified geographical area; or
  3. Work for another employer that is similar to such low-wage employee’s work for the employer.

Notably, the Act does not prohibit employers from including non-solicitation and non-disclosure provisions in low-wage worker contracts. The Act applies only to agreements entered into after the January 1, 2017 effective date. The Act applies to private employers and does not cover governmental or quasi-governmental employers.

The Act is part of the latest movement against restrictive covenants in employment. Earlier this year, Connecticut, Rhode Island, and New Mexico passed new restrictions on the use of non-competes in the health care industry, and just last month, the White House urged states to reform their laws on restrictive covenants to include banning non-competes for low-wage workers. Additionally, in June 2016, the Illinois Attorney General’s Office filed a lawsuit against the popular sandwich chain, Jimmy John’s, for its use of non-competes with low-wage employees. Jimmy John’s asserted that the non-competes were no longer in use, provided to new employees, or enforced.

Private employers in Illinois should evaluate their new hire paperwork for low-wage employees to ensure it does not include non-compete provisions, and if it does, that these provisions are removed. Employers who need to protect their trade secrets and confidential information should be sure they still include those provisions. The Act is also a good reminder to all employers that any restrictive covenant must be supported by adequate consideration (determined state-by-state), tailored to protect legitimate business interests, and to the extent possible, position specific. Whether a restrictive covenant ultimately will be enforced remains a fact and state specific inquiry.

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