On Aug. 13, 2021, Illinois Governor JB Pritzker signed Illinois Senate Bill 672 (the “Amendment”), an amendment to the Illinois Freedom to Work Act (the “Act”) that significantly limits an employer’s ability to bind employees to restrictive covenants, including non-competition and non-solicitation agreements. The Amendment, which codifies various limitations on restrictive covenants from judicial opinions, applies to non-competition and non-solicitation agreements entered into on or after January 1, 2022, and does not apply retroactively.
It is imperative that Illinois employers are aware of these sweeping changes. The following are key changes, requirements, and limitations on restrictive covenants following the Amendment:
Prior to the Amendment, the Act prohibited employers from entering into non-competition agreements with “low-wage employees”. The Act defined “low-wage employees” as employees who earn $13 per hour or less. The Amendment eliminates the term “low-wage employees” and instead prohibits employers from entering into non-competition agreements with employees earning $75,000 or less per year. Similarly, the Amendment prohibits employers from entering into non-solicitation agreements with employees earning $45,000 or less per year. In addition to salary, employers must also factor in earned bonuses, commissions, wages, tips, and amounts electively deferred by the employee, including 401(k) contributions, to determine whether an...
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