Category Archives: Freedom to Work Act

Illinois Legislature Considering Freedom To Work Act Amendments That Target Non-Compete And Non-Solicitation Clauses

employment law books and a gavel on desk in the library. concept of legal education.

Contributed By: Jeffrey Glass, April 19, 2021

In recent years, many states have enacted legislation directed at employment contracts containing non-compete and non-solicitation clauses. Illinois first did so in 2016 with the Freedom to Work Act (the Act), which bans certain Illinois employers from entering into non-compete agreements with low-wage employees.

Now, the Illinois General Assembly has taken the matter up again with additional proposed amendments to the Act.

Although the new legislation has not been finalized, some provisions that appear likely to be included in the final version are: income thresholds for employees who are not “low wage,” a requirement that the employer provide the employee with a copy of the contract in advance of signing it, employee-friendly attorney’s fee-shifting provisions, and exemptions for union workers.  While the legislation primarily is geared toward protecting employees, it also helps employers by clarifying the state of the law on several issues, including clearer standards for the enforceability of non-compete clauses.

The amendments are projected to take effect on June 1, 2021, and will not apply to contracts entered into before that date.  Employers should contact their employment counsel to make sure any agreements entered into on or after the effective date comport with the new law. SmithAmundsen attorneys are working closely with employer-side groups on the legislation and will update readers of this blog as further developments arise.

Non-Compete Agreements For Low Wage Employees Barred by Illinois’ “Freedom to Work Act”

Contributed by Michael Wong and Jeff Glass, September 20, 2016

Recently the Illinois Attorney General filed a lawsuit against a well-known restaurant franchise seeking to enjoin it from enforcing non-compete provisions in employment agreements that it had required all employees to sign, including hourly employees such as delivery drivers. The clauses at issue prohibited employees from working at any other similar business within two miles of any of the franchisor or its franchisees’ stores in the United States. Even though the franchisor agreed to voluntarily drop these clauses moving forward, the Illinois legislature took action and the Illinois Freedom to Work Act (the Act) was signed into law.

15198483 - employment contract document form with penEffective January 1, 2017, the Act will prohibit private employers from having “low wage” employees sign an agreement that includes a covenant not-to-compete. Additionally, any covenant not-to-compete entered into between a “low wage” employee and an employer will be considered illegal and void under the Act.

The Act’s prohibition will apply to any employee who earns less than $13.00 per hour or the minimum wage required by applicable federal, state or local minimum wage law.  Employers can use $13.00 as the current high water mark for who is a low wage employee, as currently, the minimum wage under federal law is $7.25, $8.25 in Illinois and $10.25 in Chicago. However, it is important to remember that if the applicable federal, state or local minimum wage is higher than $13.00 than the individual will be considered a low wage employee under the Act.

The Act defines a covenant not-to-compete as any agreement between the employee and employer that restrict the employee from:

  • performing ANY work for another employer for a specified period of time;
  • working in a specified geographic area; OR
  • working for any other employer that is similar to the employee’s work for the employer.

While the Act only applies to agreements entered into after January 1, 2017, it is anticipated that any employer seeking to enforce this type of non-compete restriction against a low wage employee will likely be subject to the same scrutiny and battle as the franchisor who was investigated by the Illinois Attorney General.

It is important to recognize that the Act does not impact employers’ ability to include non-disclosure and confidentiality provisions within agreements with low wage employees to protect confidential and proprietary information. Additionally, the Act does not address agreements to not solicit an employer’s clients/customers or employees. While a non-solicitation clause could arguably fall within the type of non-compete agreement prohibited by the Act, there are strong arguments that depending on the position and circumstances, a well drafted and limited non-solicitation of clients/customers or employees agreement is different and would be enforceable.

As a practical matter, the impact of the Act will probably be minor. Most restrictive covenant litigation does not involve low wage employees. In addition, low wage employees rarely have the level of customer goodwill that is required to support the enforcement of a non-compete agreement. Nevertheless, employers who use restrictive covenants with low wage employees should take note.

Check this blog for future developments on this Act and other issues related to restrictive covenants and unfair competition.