On August 19, 2016, Governor Bruce Rauner signed into law the Illinois Freedom to Work Act (the “Act”), which prohibits private sector employers from entering into non-competition agreements with their “low-wage employees”.  The Act takes effect on January 1, 2017 and only applies to agreements executed after that date.  The Act defines a “low-wage employee” as any employee who earns the greater of (1) the applicable federal ($7.25), Illinois ($8.25) or local ($10.50 for Chicago) hourly minimum wage; or (2) $13.00.  Private employers should assume that the Act will originally apply to all employees earning $13.00 per hour or less.

Importantly, the Act appears on its face to restrict non-competition clauses and does not appear to apply to non-solicitation clauses or clauses that prevent the disclosure of confidential information.  The Act prevents agreements that restrict the “low-wage workers” from performing: (1) any 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 included as a party to the agreement.

To comply with the Act, Illinois employers should immediately review their employment practices to ensure that they are not requiring employees earning $13.00 per hour or less to sign non-competition agreements.  Employers should also ensure that they are not utilizing a “one size fits all” employment agreement if the employer has workers making $13.00 per hour or less.  

The Act comes on the heels of the Illinois Attorney General’s June 2016 lawsuit against a well-known restaurant franchisor seeking to bar the franchisor from utilizing non-compete agreements with low-wage staff.  Like any newly enacted law, the true scope and impact of the Act will be determined over time through future court proceedings.