Amendments to the Freedom to Work Act (820 ILCS 90) will take effect on January 1, 2022. This means that all non-compete and non-solicitation agreements entered into on or after this date must comply with the new requirements (agreements entered in before this date do not need to be amended because the changes will not apply retroactively). The amendments include an annual wage requirement, new enforcement requirements, and more authority given to the court.
A non-compete agreement is an agreement between an employer and employee, where the employee agrees to refrain from engaging in certain competitive activities after their employment ends. Similarly, a non-solicitation agreement prevents the employee from selling to or taking the employer’s clients or other employees following the end of the relationship.
Under current law, low-wage employees (an employee who earns $13 an hour or less) are prohibited from being restricted by either of these agreements. However, the new law changes the low-wage requirement to an annual earning requirement for both non-compete and non-solicitation agreements.
With these changes to existing law, all employees earning $75,000 or less can no longer be restricted by non-compete agreements. This threshold is expected to increase to $80,000 in 2027, $85,000 in 2032, and $90,000 in 2037.
Likewise, after January 1, to enter into a non-solicitation agreement, employees will have to earn more than $45,000 per year. This salary threshold will be adjusted for inflation, meaning it is expected to increase to $47,500 in 2027, and to $50,000 in 2032.
The changes to existing law also require additional consideration for enforcement, a subject that the Illinois appellate courts and federal courts disagreed upon. With these changes, in order for a non-compete or non-solicitation agreement to be enforced, the employee must have worked for the employer for at least two years after signing the agreement or the employer must have provided some adequate consideration to support the agreement, such as financial or professional benefits.
Furthermore, the employee must be given at least fourteen days to review and sign the agreement and be advised in writing to consult with an attorney.
The amendments confirm that the courts will be able to use their discretion to reform or sever provisions of a non-compete or non-solicitation provision, so that it may still be enforced.
The amendments also change the cost calculus for both sides, as the amendments allow employees who are successful in a claim by their employer asserting the employee violated the restrictive covenant to recover their attorney’s fees and costs. The law will also provide for enforcement by the Illinois Attorney General’s office, including penalties.