The State of Illinois recently enacted a new law called the Illinois Freedom to Work Act (“Act”). 820 ILCS 90/1 et seq. The Act took effect on January 1, 2017 and impacts many Illinois employers and their ability to restrict the behavior of certain employees for activities that may be seen as competitive to that of the employer.
In short, the Act states “No employer shall enter into a covenant not to compete with any low-wage employee or the employer” and “a covenant not to compete entered into between an employer and a low-wage employee is illegal and void.” The Act defines “covenant not to compete” under the Act as “an agreement between an employer and a low-wage employee that restricts such low-wage employee from performing: (a.) any work for another employer for a specified period of time; (b.) any work in a specified geographical area; or (c.) 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 following are some basic facts about the Act.
WHAT EMPLOYERS ARE COVERED BY THE ILLINOIS FREEDOM TO WORK ACT?
All Illinois private sector businesses and individuals that hire employees are covered under the ACT. The ACT expressly excludes applicability to governmental or quasi-governmental bodies.
HOW DOES THE ILLINOIS FREEDOM TO WORK ACT IMPACT A COVERED EMPLOYER?
The Illinois Freedom to Work Act bars covered employers from requiring “low-wage employees” (defined as an employee making the greater of Federal, State or Local minimum wage or $13.00 per hour). At the time of writing this article, most employees in Illinois would be required to make in excess of $13.00 per hour to be excluded from coverage under the Act.
ARE THERE EXCEPTIONS TO THE ILLINOIS FREEDOM TO WORK ACT?
Not for private sector employers. All private sector employers are covered under the Act. However, the Act only applies to employers that enter into non-competition agreements with low-wage employees on and after the Act’s effective date of January 1, 2017.
WHAT IS THE PENALTY FOR NON-COMPLIANCE WITH THE ILLINOIS FREEDOM TO WORK ACT?
Any non-compete agreement made in violation of the Act is illegal and void. A risk for an employer in entering into a non-compete agreement in violation of the Act is that a court could potentially scrutinize the enforceability of other portions of the employment agreement, which may also contain valuable non-solicitation of clients and confidentiality provisions.
WHAT CAN COVERED EMPLOYERS DO TO COMPLY WITH THE ILLINOIS FREEDOM TO WORK ACT?
The new legal requirements that the Illinois Freedom to Work Act imposes on many Illinois employers represents a bright line rule against non-complete agreements for low-wage employees, which did not exist prior to the Act. Practically speaking, many employers already avoid non-competition agreements with low-wage employees because courts would likely not enforce such agreements absent a legitimate business interest to do so. However, some businesses use broad brush employment, non-competition, non-solicitation, and confidentiality agreements that should now be examined carefully to make sure they do not violate the Act as to low-wage employees. Illinois employers should carefully review their procedures with legal counsel to ensure that they are not seeking non-competition agreements with low-wage employees.
Based upon recent Illinois law changes, it is important for employers to look closely at their policies and materials used for recruiting and hiring new employees. For more information about this article, or Illinois employment law in general, please feel free to contact John W. Albee at Albee Law PC via telephone (312) 279-0115 or via email at jalbee@albeelaw.com.
