For years, imposing noncompete agreements in Illinois was akin to the Wild West.
Not too long ago, nonetheless, the Illinois legislature enacted a brand new regulation affecting the enforceability of non-competes. In its most simple type, a non-compete is an settlement between an employer and an worker that prohibits an worker from working for a competitor for a time frame after the worker now not works for that employer.
Non-competes have been meant to guard employers from staff leaving and dealing for a competitor. The objective was to forestall former staff from utilizing confidential and proprietary data gained and relationships constructed with clients on the prior employer for the good thing about a competitor. It additionally discouraged employers from poaching staff from opponents.
Non-competes ultimately turned extra advanced and would possibly prohibit an worker from proudly owning, consulting with, or having any involvement in any way with a competitor. Courts turned involved that non-competes have been changing into so burdensome they now not achieved the preliminary function — to guard an employer’s respectable enterprise pursuits.
Reasonably, now they put an unreasonable restraint on a person’s capacity to work. Consequently, our courts recognized components essential to restrict how far an worker’s actions might be restrained after leaving an employer and requiring that staff obtain one thing in alternate for coming into into the noncompete.
One aspect is requiring the worker be given consideration for signing the noncompete. Consideration may be something from the supply of employment itself, precise cash paid to the worker or extra advantages. A noncompete will need to have an inexpensive geographic space wherein an worker is prohibited from competing.
The size of time the worker is prohibited from competing in opposition to the employer and the kind of actions which might be thought-about to be “competing” with the employer have to be cheap. Moreover, an employer should additionally present that it has a respectable enterprise curiosity that’s in want of safety as a way to justify imposing the noncompete in opposition to the worker.
The Illinois Supreme Courtroom created a “totality of the circumstances” take a look at to find out whether or not an employer has a respectable enterprise curiosity and laid out a number of elements to have a look at when making this dedication. Nonetheless, there was by no means a bright-line rule for every of those components and thus every noncompete settlement was reviewed individually.
This case-by-case evaluation continued for a number of years. In 2022, the state legislature enacted amendments to the Illinois Freedom to Work Act that have been purported to deliver extra readability to those points with non-competes.
Probably the most vital modifications this new regulation made was the establishment of a minimal compensation threshold that’s required to ensure that a noncompete to be legitimate. Initially, that compensation threshold is $75,000, and this threshold will improve over time. Thus, any noncompete entered into with an worker that makes lower than $75,000 in compensation per yr is invalid and unenforceable.
The brand new regulation additionally instituted a requirement that employers give staff discover of and a chance to assessment any noncompete with a lawyer of the workers selecting. It additionally gave the Legal professional Common the ability to prosecute employers discovered to be ordinary violators of the brand new regulation.
What the brand new regulation didn’t do, nonetheless, is present way more readability to the weather of an enforceable noncompete and the elements to be reviewed. The brand new regulation has basically codified the prior case regulation on these points, however has not offered the readability that practitioners had hoped for.
Most just lately, the FTC has proposed a brand new rule that may ban non-competes totally, though this has but to be instituted. Thus, it seems that non-competes will proceed to be a hotly litigated problem for the foreseeable future.
• Lindsay Sanchez is an legal professional in St. Charles. She focuses her observe on company regulation, employment regulation, business and actual property transactions and civil litigation.
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