Illinois Passes Bill To Further Limit Restrictive Covenants For Employees

Jackson Lewis P.C.
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After extensive negotiations between interest groups representing both employees and businesses, the Illinois General Assembly passed a major bill on May 31, 2021, that further limits and clarifies the circumstances in which restrictive covenants can be enforced against Illinois employees. Illinois Governor J. B. Pritzker is expected to sign the bill into law.

We provide a detailed analysis of the new law and its impact for Illinois employers in our article here. The new law goes into effect January 1, 2022, and applies to agreements entered on or after that date.

At a high level, the new law imposes several major changes:

  1. Non-competes will be invalid for employees earning less than $75,000 per year, with the minimum increasing over time.
  2. Non-solicitation covenants (defined to include non-solicitation of employees and actual or prospective customers, vendors, and suppliers) will be invalid for employees earning less than $45,000 per year, with the minimum increasing over time. This is significant. Other states that recently regulated restrictive covenants generally did not expressly affect non-solicitation provisions.
  3. Non-competes and non-solicitation covenants will be void for employees furloughed or terminated due to business circumstances or governmental orders related to COVID-19 or similar circumstances, with a limited exception for non-competes enforced through payment of base salary in the enforcement period.
  4. Non-competes (but not non-solicitation covenants) will be prohibited for employees covered by a collective bargaining agreement under the Illinois Public Labor Relations Act or the Illinois Educational Labor Relations Act or individuals employed in construction, subject to limited exceptions.
  5. The well-known Fifield standard under Illinois law is now codified in the law.
  6. Employees must be advised in writing to seek attorney consultation and provided at least 14 calendar days to review a restrictive covenant before signing.
  7. The Illinois attorney general will have the right to initiate investigations and initiate or intervene in a civil action to compel compliance. The attorney general may request a court to impose civil penalties not to exceed $5,000 for each violation, or $10,000 for each repeat violation within a 5-year period.

In short, this is a major overhaul of restrictive covenant law in one of the nation’s most heavily populated states. We will continue to analyze these issues and explore their practical impact for employers.

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