New in Illinois: Non-Compete Agreements With Low-Wage Earners are Illegal

On January 1, 2017, the Illinois Freedom to Work Act went into effect. The law prohibits private employers from entering into a non-compete agreement with “any low-wage employee.” The statute makes any such agreement “illegal and void.”

Under the law, a non-compete agreement applies to the many common restrictive covenants including:

  1. Any agreement that prohibits working for any other employer for a specific period of time;
  2. Any agreement that prohibits working within a specific geographic area; or
  3. Any agreement that prohibits working for another employer in the same or similar position as the employee current holds.

The restriction only applies to a  “low-wage employee” which is defined as an “employee who earns the greater of (1) the hourly rate equal to the minimum wage required by the applicable federal, State, or local minimum wage law or (2) $13.00 per hour.”

The new law applies only to those restrictive covenants entered into after January 1, 2017. Any previously executed agreement may still be enforceable, but will still be subject to common arguments that made non-compete agreements against low-wage earners difficult to enforce.

What Does This Mean Going Forward?

Employers: Employers that have made it a practice to ask all employees to enter into non-compete agreements, irrespective of hourly rate, will need to reevaluate those practices. The law also leaves open whether the definition of a restrictive covenant will apply to other common restrictions including non-solicitation agreements that apply to employees and customers.

Employees: Low-Wage Employees will no longer be tied down by a non-compete that can have a very real impact on upward mobility in the job market.

In Practice: The impact of this law will be minimal. Even when a “low-wage” employee was subject to a non-compete agreement, they were often not enforced. These employees rarely pose a threat to the company’s legitimate business interests and as a result even if a lawsuit was filed it is unlikely they would in fact be enforced.

If you are looking for work and are stuck with a non-compete agreement, or are a company in need of enforcing a non-compete agreement, or having one drafted, you need to speak to an employment lawyer at Maduff.