Governor Bruce Rauner has signed into law the Illinois Freedom to Work Act, prohibiting private sector employers from requiring their “low-wage employees” to sign non-compete agreements. The Act takes effect on January 1, 2017, and applies to all agreements entered into after that date.
According to the Act, no employer may enter into a covenant not to compete with any low-wage employee. The Act defines “low-wage employee” as an employee who earns the greater of (1) the minimum wage required by federal ($7.25 per hour), State ($8.25 per hour in Illinois), or local minimum wage law ($10.25 in Chicago, and rising in the future); or (2) $13.00 per hour. Put more simply, until any applicable minimum wage rises above $13.00 per hour, employers should assume that the Act applies to all employees earning $13.00 per hour or less.
The Act also defines “covenant not to compete” as any agreement that restricts an employee from performing:
- any work for another employer for a specified period of time;
- any work in a specified geographical area; or
- work for another employer that is similar to such low-wage employee's work for the employer included as a party to the agreement.
The Act is written broadly, and will apply to most non-compete restrictions contained within an employment agreement.
As mentioned above, the Act applies prospectively to agreements entered into after January 1, 2017. However, employers seeking to enforce non-compete restrictions against low-level employees may face an uphill battle. The Act’s passage comes just months after Attorney General Lisa Madigan filed a lawsuit against sandwich chain Jimmy John’s, seeking to prohibit enforcement of its broad post-employment restrictive covenants against entry level employees, such as sandwich makers and delivery drivers. Governor Rauner and the Illinois General Assembly have ensured that employers cannot include these kinds of restrictions in future agreements with low-wage workers.