• Illinois Law Bars Non-Competition Agreements with "Low-Wage Employees"
  • October 16, 2017 | Author: Elizabeth Meyer Pall
  • Law Firm: Burke, Warren, MacKay & Serritella, P.C. - Chicago Office
  • On January 1 of this year, the Illinois Freedom to Work Act went into effect. The new law prohibits private sector employers from entering into covenants not to compete with "low-wage employees," employees who earn the greater of the applicable hourly minimum wage (currently $7.25 per hour under federal law, $8.25 per hour under Illinois law, and $10.50 per hour under the City of Chicago Minimum Wage Ordinance) or $13.00 per hour. Thus, unless and until the minimum wage is increased above $13.00 per hour, the Act prohibits employers from entering into covenants not to compete with employees who earn $13.00 per hour or less.

    The Act's definition of "covenant not to compete" includes any agreement entered into after January 1, 2017 that restricts the 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 the employee's work for the employer. The Act states that any such covenant not to compete between an employer and a low-wage employee is "illegal and void."

    The new law comes on the heels of a June 2016 lawsuit filed by the Illinois Attorney General against Jimmy John's Enterprises LLC, alleging that Jimmy John's imposed highly restrictive non-competition agreements on its employees, including low-wage sandwich shop employees and delivery drivers. As part of the December 2016 settlement of that suit, Jimmy John's agreed to cease using such non-competition agreements and notify all current and former employees that their non-competition agreements were unenforceable.

    To ensure compliance with the Illinois Freedom to Work Act, Illinois employers should review their practices to confirm they are not requiring employees earning $13.00 per hour or less to enter into non-competition agreements. The Act, however, does not prohibit employers from requiring employees to execute non-disclosure or other confidentiality agreements aimed at protecting an employer's confidential information, nor does it expressly apply to non-solicitation agreements that prohibit an employee from soliciting an employer's customers or other employees.