On August 19, 2016, Governor Rauner signed into law the Illinois Freedom to Work Act. The Act takes effect on January 1, 2017. The Act prohibits employers from entering into covenants not to compete with any low-wage employee of the employer and, further provides that a covenant not to compete entered into between an employer and a low-wage employee is illegal and void.
The Act defines a low-wage employee as an employee who earns the greater of (1) the hourly rate equal to the minimum wage required by the applicable Federal, State or local minimum wage law or (2) $13.00 per hour. The term “employer” maintains the meaning contained in subsection (c) of Section 3 of the Illinois Minimum Wage Law. However, the term “employer” does not include governmental or quasi-governmental bodies.
A covenant not to compete means an agreement restricting the 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 employee’s work for the employer included as a party to the agreement. The Act covers such agreements entered into after January 1, 2017. The news recently contained some examples of such agreements with low-wage employees when Attorney General Madigan challenged such agreements entered into between Jimmy Johns and their employees.
Related reading: Non-Compete Agreements Under Attack in Illinois
Non-competes with low level employees are not necessarily unusual as some employers still make it a condition of employment for all employees, regardless of their job duties. However, the better practice is to tailor non-competes to executive employees, employees who have day to day contacts with customers of the business such as outside and inside sales personnel, and employees who work in areas of intellectual property such as products or services subject to patents and trademarks.
Employers should as a practical matter restrict subsequent employment opportunities to those employees who can reasonably be expected to adversely impact the employer’s business upon departure. Employers should keep in mind that restrictions greater than 2 years and/or those expanding beyond the employee’s geographical scope of work are likely to be declared illegal.