Illinois Employers Prohibited from Requiring Low-Wage Employees to Execute Non-Compete Agreements
Illinois enacted the Freedom to Work Act (the "Act") on August 19, 2016. Beginning on January 1, 2017, the Act prohibits private sector employers from requiring "covenants not to compete" of low-wage employees, or those who earn not more than $13 per hour or not more than the applicable federal, state or local minimum wage law, whichever is greater. Because the federal, Illinois and Chicago minimum wage laws are all less than $13 per hour, the Act currently covers only employees who earn $13 per hour or less. The Act states that any covenants not to compete entered on, or after, January 1, 2017 preventing low-wage employees from doing any of the following after employment with their current employer will be declared "illegal and void":
- Working in a specified geographic area;
- Working for another employer for a specified period of time; or
- Working for another employer that is similar to such low-wage employee's work for the employer included as a party to the agreement;
The goal behind the Act is to promote the mobility of vulnerable and unsophisticated low-wage employees and counteract abusive efforts intended to coerce employees to remain working for the same employer to avoid litigation. Illinois joins a host of other states, such as Maryland, Washington, Oregon and Idaho, which have also cracked down on non-compete agreements with low-wage earning employees.
It is important to note the Act does not expressly prohibit other types of restrictive covenants with low-wage employees, such as confidentiality agreements, non-solicitation agreements or non-disclosure agreements. Likewise, the Act does not expressly apply to non-compete agreements executed before January 1, 2017; however, employers would be wise to revisit pre-existing non-compete agreements with low-wage employees for the sake of uniformity in enforcement and to avoid potential discord between pre-existing employees and new hires.
For more information or assistance with revising non-compete agreements for your low-wage employees, please contact Naureen Amjad, a Partner in Pedersen & Houpt’s Employment Practice Group, at 312.261.2273 or at email@example.com.