Payday Lender Ends Non-Compete Agreements for Low-Wage Employees in Settlement of Illinois Lawsuit

Saul Ewing Arnstein & Lehr LLP

Payday lender Check Into Cash of Illinois LLC has agreed to stop using restrictive non-compete agreements for low-wage customer service employees at its 33 Illinois locations to settle a lawsuit by the State Attorney General’s office.

Attorney General Lisa Madigan sued Check Into Cash in October 2017, alleging that the lender required employees who made $13 an hour to sign highly restrictive non-compete agreements in violation of the Illinois Freedom to Work Act, which prohibits the use of non-compete agreements for employees paid the greater of minimum wage or $13 per hour. The state alleged that Check Into Cash’s non-compete agreements effectively prevented low-wage employees from working for a broad range of other businesses for one year after they leave the company, including businesses offering credit lending, installment lending, consumer lending, money transmission, or similar services, to name a few. The lawsuit alleged that the non-compete was so broad that even businesses such as retail stores or auto dealerships, or entities like the U.S. Postal Service, could fall within the lender’s broad definition because they extend credit on an incidental basis or transmit money. In addition, the non-compete agreements imposed an overly broad geographic restriction on employees, because they were not allowed to work within a 15-mile radius of any Check Into Cash store throughout the country, instead of being limited to the store where the employee actually worked.

As part of the settlement, Check Into Cash also agreed to pay $75,000 to the Illinois Attorney General’s office, which will be used toward public outreach on non-compete agreements. Madigan stated in a press release that the settlement "ends the company's inappropriate practice of limiting low-wage workers employment options by requiring them to sign unfair non-compete agreements."

Employers should be mindful of the national trend limiting the use of restrictive covenants when drafting and reviewing their restrictive covenants, particularly with low-wage employees. In 2018, Massachusetts passed a bill requiring employers to limit their restrictive covenants. We wrote about that bill here. In 2017, New Jersey and Pennsylvania also considered bills severely limiting the use of restrictive covenants, especially for low-wage employees. We wrote about those bills here and here. In addition, Madigan’s office has filed a number of suits against companies operating in Illinois that impose inappropriate and overly restrictive non-competes for low-wage workers.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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