Employers often require their employees to sign a non-compete agreement. The agreements vary in terms of length, geography, and industry. Currently, Illinois courts have discretion when determining whether these agreements are valid.
The Illinois Supreme Court indicated that total or general restrains on trade are invalid because they injure the public; however, a non-compete agreement is valid if it is reasonable and is supported by consideration, or a legal benefit to the parties. Reliable Fire Equip. Co. v. Arredondo, 2011 IL 111871, ¶ 16. The Court also stated that an employer’s “legitimate business interest” are “a long-established component” when determining whether an agreement is reasonable. Id. ¶ 30. For example, it might be reasonable to prevent an employee from working with a competitor for some period of time if the employee knows important trade secrets.
Recently, Illinois Representative Thomas Morrison introduced the Employment Non-compete Agreement Act (“Act”), HB 2782, into the Illinois General Assembly. The Act includes several important sections. First, it indicates non-compete agreements are a matter of public policy. Second, the Act provides that the length of a non-compete agreement is tied to the employee’s compensation. So an agreement can last eighteen months if an employee makes at least $150,000 a year. Third, the Act also indicates that an employer does not have to provide an employee any consideration, or a legal benefit, for signing a non-compete agreement. Finally, a subsequent employer that “aids and abets an employee’s breach of a valid noncompete agreement” is liable for litigation expenses.
While there is no certainty that the Illinois General Assembly will pass the Act, its passage would most likely hinder employees from obtaining new jobs. By shifting litigation costs to a new employer, employees might face difficulty acquiring jobs during the non-compete period. Further, the Act does not appear to require that a non-compete agreement protect an employer’s “legitimate business interests.” Thus, even if an employee is unlikely to harm an old company by taking clients or trade secrets to a new company, the employee would have wait before working again.