Comprehensive, Bipartisan Non-Compete Legislation Introduced in the Illinois General Assembly

Comprehensive, Bipartisan Non-Compete Legislation Introduced in the Illinois General Assembly

Representative Kelly Burke recently introduced Illinois House Bill 789, a bipartisan bill aimed at reforming non-compete and non-solicitation litigation in Illinois. The Senate version of the bill, S.B. 3430, was introduced last year by Senator Heather A. Steans and co-sponsored by Senator Jason A. Barickman.

If passed, this legislation would improve employee mobility (especially critical right now due to COVID-19), deter unnecessary lawsuits, continue to protect businesses’ legitimate interests, and bring significant clarity to this area of law in Illinois. This legislation is supported by the Illinois Chamber of Commerce, reflecting the interests of the business community, and the Illinois chapter of the National Employment Lawyers Association, a legal organization advocating for employees’ rights. This is legislation that I helped co-draft with attorneys on both sides of the aisle, and believe provides common-sense solutions for Illinois’s employees and businesses.

Employees are routinely required by employers to sign non-compete and non-solicitation agreements, which are types of business contracts, either at the start of their new jobs or sometimes during current employment. Non-compete agreements restrain employees from working for a competing business, whereas non-solicitation agreements prevent employees from contacting certain customers or co-workers after a job ends.

It is estimated that about 14% of American workers who make less than $40,000 annually are currently subject to a non-compete. Even though these workers rarely have access to confidential or critical business information, they are still deterred or blocked from accepting certain new jobs. For example, Jimmy John’s used to make its sandwich-makers sign non-compete agreements that prevented them from working for rival employers, such as a Subway or Potbelly’s. These restraints harm both businesses and employees by limiting employment options for all parties and hurting employee mobility.

For most employers and employees – low-wage or otherwise – non-compete disputes are often expensive. The cases are expedited, often lead to appeals, and can quickly cost parties five to six figures in legal fees. These lawsuits can be prohibitively expensive for a new employer who can be sued for hiring an employee subject to a non-compete agreement. At a minimum, being embroiled in expeditated litigation is an unnecessary distraction for employees attempting to start a new job.

Moreover, there has been legal confusion in Illinois over the past seven years regarding the state of non-compete law, making it difficult for employers to hire employees, giving rise to forum-shopping as state and federal courts have interpreted non-compete laws differently.

The recently proposed legislation seeks to amend the Illinois Freedom to Work Act and provide common-sense solutions for Illinois businesses, employees, and courts, while also clarifying the law. These are some of the bills’ key provisions:

  • Companies can continue to enforce non-compete and non-solicit agreements when there is a legitimate business interest a company needs to protect.
  • Non-compete agreements are prohibited for all employees making less than $75,000 per year (which increases to $90,000 by 2037). This is one of the most progressive thresholds in the U.S. and will increase employee mobility.
  • Non-solicit agreements are prohibited for all employees who make less than $45,000 per year (which increases to $52,500 by 2037).
  • Employees impacted by COVID-19 are protected: non-compete agreements will not be enforceable against employees who lost their jobs due to COVID-19 or a similar pandemic, unless the former employer continues to pay their base salary.
  • The amount of consideration necessary to enforce a non-compete or a non-solicitation agreement is explicitly codified, resolving a dispute between the state and federal courts in Illinois. Courts can only enforce a non-compete or a non-solicit agreement if an employee has worked for an employer for at least 2 years or has received some other benefit for the restriction.
  • To deter lawsuits, if an employee wins a lawsuit an employer filed, the employee will be entitled to recover attorneys’ fees. This is similar to a provision in Utah.
  • Finally, employers will be required to provide employees with 14 days to consider and review any non-compete or non-solicit agreement. This will help employees understand their obligations and promises.

We will continue to monitor the status of this bipartisan legislation. Please contact us regarding any questions related to this comprehensive reform.

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