Last month, Governor Bruce Rauner signed into law the Freedom to Work Act. The law makes it illegal for an employer to enter into a non-compete agreement with a low-wage employee. It defines low-wage employee to be any employee making either minimum wage or less than $13 an hour.
The law defines a non-compete agreement to be any agreement prohibiting an employee from working:
1. for another employer for a specified period of time;
2. in a specified geographic area; or
3. for another employer who does similar work to that done by the employee’s current employer.
The law takes effect on January 1, 2017, and only applies to non-compete agreements entered after that date.
Non-compete agreements have come under fire recently. A 2013 Illinois appellate court decision criticized employer use of non-compete agreements and made them more difficult to enforce. The White House recently commissioned a study of non-compete agreements that criticized the way in which they are often used.
As we have reported, certain employers require all of their employees to enter non-compete agreements, even if the employees only make sandwiches. Such a practice, which has been disfavored by courts, could now be illegal. It is likely that employers who require all of their employees to enter into non-compete agreements do not seek to enforce these agreements, but seek to use them as a disincentive to employees leaving. Doing this is illegal, and could subject employers to punitive damages.
While employers should not require all employees to enter into non-compete agreements, there is no question that these agreements are vitally important in regards to certain employees. Courts in Illinois disfavor non-compete agreements, so they must be drafted in a way that a court will not invalidate. Employers probably should consult an attorney before entering into a non-compete agreement. Contact me (firstname.lastname@example.org; 312.604.9125) if you have questions about your non-compete agreements.