Governor Bruce Rauner recently signed into law the Illinois Freedom to Work Act (the Act), which will prohibit private sector employers from entering into non-compete agreements with low-wage employees. The Act defines low-wage employees as those who earn the greater of: (a) the Federal ($7.25 per hour), State ($8.25 per hour), or local (currently, $10.50 per hour under the Chicago Minimum Wage Ordinance) minimum wage; or (b) $13.00 per hour.
A covenant not to compete entered into between an employer and a low-wage employee is considered illegal and void under the Act. The Act defines a prohibited “covenant not to compete” as an agreement that would prohibit a low-wage employee from: (a) working for another employer for a specified period of time; (b) working in a specified geographic area; or (c) engaging in similar work for another employer.
Significantly, while the Act prohibits non-compete provisions, it does not affect an employer’s right to protect confidential information and trade secrets or to prohibit the solicitation of otherwise protected relationships through, for example, a non-solicitation provision.
The Illinois Freedom to Work Act is effective January 1, 2017 and allows private litigants to pursue declaratory relief when there is a judiciable controversy over their own non-compete agreement.
This Act follows a lawsuit recently by the Illinois Attorney General involving the sandwich chain Jimmy John’s use of non-competition agreements to prevent lower paid hourly workers from working at competitors of Jimmy John’s, as well as a general trend throughout the country of cases challenging the enforceability of non-compete agreements with low-wage employees.