Author: Laura Friedel
Amendments to the Illinois Freedom to Work Act mean that for restrictive covenant agreements signed on or after January 1, 2022:
- Employees making $45k or less per year can’t be subject to non-solicits and employees making $75k or less per year can’t be subject to non-competes
- “Adequate Consideration” must be provided (either 2 years’ employment after signing or other adequate consideration)
- Enforceability will depend on the particular facts at issue, including whether the employee was exposed to customer and employee relationships, the near-permanence of customer relationships, the acquisition, use and knowledge of confidential information, and the scope of the restriction (time, geography and scope of activity)
- Blue-penciling (court revising provision to make it enforceable) is still permitted but courts need to consider a number of factors, including whether the restrictions as written were a good faith effort to protect legitimate business interests, and won’t wholly rewrite covenants
- And perhaps most critically…. for the agreement to be enforceable, the employee must be given 14 days to consider the agreement and be told to consult with an attorney
These changes mean that companies who have their Illinois employees sign restrictive covenants must revise their templates. There are two ways we can help you get ready:
Option 1: Review your template agreements broadly to make sure that you’re meeting the new legal requirements and optimizing enforceability while protecting the company’s legitimate business interests.
If you’d like to consult with one of our Employment attorneys in this review, please click here and we’ll be in touch.
Option 2: If you’re not interested in doing a larger review, at a bare minimum, it’s critical that you add “magic language” to your templates saying that the employee has had 14 days to consider the agreement and has been advised to talk with an attorney before signing.
If you would like this language to drop into your standard agreements, we are happy to provide it to you free of charge – click here to request.
If you have any questions or would like to talk further about the best way for your company to comply with Illinois’ new requirements, please contact us at EmploymentLaw@lplegal.com – we’d love to help!
For years, academics have debated the impact of post-employment non-competes on the economy and workforce. Apparently taking interest in this issue, earlier this month a bipartisan group of United States Senators, including Senator Marco Rubio of Florida, wrote to the United States Government Accountability Office asking it to review and report on non-competes, including how prevalent they are, how they’re used in low-wage fields, the impact of the workforce and economy (including innovation), and actions states have taken to limit the use of non-competes. A copy of the letter can be found here.
Non-competes, non-solicits and similar agreements continue to be viewed with great scrutiny. It is important to review these types of agreements frequently to comport with changing legal standards.
This week the White House issued a statement encouraging state lawmakers to ban non-compete agreements for workers who: (i) fall below certain wage thresholds; (ii) likely do not possess trade secrets; (iii) work in occupations related to public health and safety; or (iv) would suffer “undue adverse impacts” from being limited by a non-compete (such as those terminated without cause). The White House further encouraged states to require that non-compete agreements be presented to employees before a job offer or a significant promotion has been accepted so that it can be considered as part of the offer.
According to the White House, “[i]n adopting these strategies, states can help ensure that workers can move freely from job to job, without fear of being sued … Even in states that choose to enforce noncompetes, we have heard from experts that only in rare cases is a noncompete the best option for an employer to use, over and above the host of other legal frameworks — including trade secret protections, nonsolicitation agreements and nondisclosure agreements.” State officials from a number of states, including Illinois, released statements supporting the White House’s announcement.
It remains to be seen whether any states follow the White House’s suggestion and enact they types of provisions being recommended. We will keep you updated on any developments.
Under the new Illinois Freedom to Work Act, Illinois employers cannot impose non-compete agreements on “low wage employees.” The Act comes in response to growing concerns and lawsuits over non-compete agreements imposed on employees by certain fast-food companies. Effective January 1, 2017, the Act defines a “low wage employee” as any employee who earns the greater of (1) the hourly minimum wage under federal (currently $7.25 per hour), state (currently $8.25 per hour) or local law (currently $10.50 per hour in Chicago) or (2) $13.00 per hour. The Act defines a non-compete agreement as an agreement between an employer and a “low-wage employee” that restricts such low-wage employee from performing:
- any work for another employer for a specific period of time;
- any work in a specified geographical area; or
- 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 Act does not specifically ban non-solicitation agreements with low-wage employees, in which the employee promises not to solicit employer customers or employees. This will likely be answered in future litigation … stay tuned.
Similarly, the New York Attorney General has been extremely critical of non-competes for low-wage employees, and has publicly announced various monetary settlements with employers who required low-level employees to sign non-competes as a condition of employment. Employers with New York operations should be very wary of requiring low-wage workers to sign such agreements, and are encouraged to consult counsel before doing so.
On Wednesday, President Obama signed into law the Defend Trade Secrets Act of 2016 (DTSA). The DTSA sets a single national standard for trade secret protection and gives the option of bringing trade secret cases in federal court and provides for remedies (such as seizure and recovery of stolen trade secrets). The DTSA also creates whistleblower protections for employees who disclose trade secrets to an attorney or governmental official for the purpose of reporting or investigating a suspected violation of law. But most urgently for employers, the DTSA contains a new notice requirement that employers need to take action quickly to satisfy.
Effective immediately, any new or updated agreements with employees, consultants or independent contractors that govern trade secrets or confidential information need to include a “notice-of-immunity.” The notice may be provided via reference to a general policy document rather than restating the entire immunity provisions in each agreement. An employer that fails to provide this notice will forfeit their right to exemplary double damages and attorneys’ fees in an action brought under the DTSA.
Employers wishing to take advantage of the DTSA’s protections need to revise their standard agreements and ensure that any agreement provided on or after May 11, 2016 includes the required notice-of-immunity. We recommend that you consult with legal counsel to ensure compliance with this new requirement.
This year, LP’s Labor & Employment attorneys tried something different with our annual “Employment Law Update” and hosted the program as a webinar. The new format allowed us to record this year’s program and make it available for all our blog friends, colleagues and clients who were unable to participate. LP labor and employment attorneys Peter Donati, Laura Friedel and Kenneth Kneubuhler highlighted recent updates in labor and employment law and tips to keep your workplace practices current.
You can find the recording here and the presentation materials here.
To give you an idea of what topics are covered in this year’s “Employment Law Update” here are the topics we discussed:
•The impact of recent Supreme Court decisions on supervisor liability and the burden of proof for retaliation claims
• Trends involving arbitration agreements: Will they prevent class claims? Should your business be using them?
• Same sex marriage: How it affects employee rights under the FMLA and benefit plans
• Recent Illinois cases involving non-compete agreements. Will your agreements be enforceable when you need them?
• New developments at the National Labor Relations Board that affect both union and non-union workplaces
• How to properly use background checks to avoid scrutiny by the EEOC and avoid violating state laws
• Current wage and hour issues, including developments involving interns and independent contractors
• Other important state law trends, including laws on concealed weapons, medical marijuana, and social media passwords