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Illinois Prohibits Non-Compete Agreements with Low-Wage Employees

Effective January 1, 2017, the Illinois Freedom to Work Act (the “Act”) will prohibit private sector employers from entering into non-competition agreements with employees earning a “low wage.”  The Act defines low-wage employees as those who earn the greater of: (a) the federal ($7.25 per hour), state ($8.25 per hour), or local (currently, $10.50 per hour under the Chicago Minimum Wage Ordinance) minimum wage; or (b) $13.00 per hour.  The Act defines prohibited restrictions on competition as those that limit a low-wage employee from: (a) working for another employer for a specified period of time; (b) working in a specified geographical area; or (c) engaging in similar work for another employer.  Under the Act, these restrictions will be deemed “illegal and void.”  Notably, the Act does not affect an employer’s right to protect confidential information and trade secrets through confidentiality agreements with any worker, including low-wage employees.Illinois freedom to work act

The Act follows (i) a lawsuit brought by the Illinois Attorney General involving sandwich chain Jimmy John’s use of non-competition agreements to prevent low-wage earners from working at competitors (Jimmy John’s recently reached an agreement with the New York Attorney General to cease that practice); and (ii) a trend of cases around the country challenging the propriety of non-compete agreements with lower-level employees.

In light of the Act and uptick in scrutiny in this area, employers should revisit the application of their non-competition agreements to ensure that they apply to the appropriate employee population.

© 2020 Proskauer Rose LLP.


About this Author

Steven J Pearlman, Labor Employment Law Firm, Proskauer Law firm

Steven Pearlman is a partner in the Labor & Employment Law Department and co-head of the firm's Whistleblowing & Retaliation Group, resident in the Chicago office. Steven’s practice focuses on defending complex employment litigation involving claims of discrimination and harassment, wage-and-hour laws and breaches of restrictive covenants (e.g., non-competition agreements). He has successfully tried cases to verdict before judges and juries in Illinois, Florida and California, and defended what is reported to be the largest Illinois-only class action in the history of the U.S....

John P Barry, Proskauer Law Firm, Labor Employment Attorney

John P. Barry is a Partner in the Labor & Employment Law Department and co-head of the Non-Compete & Trade Secret Group, resident in the Newark office.

Sunghee W Sohn, Proskauer, collective bargainng lawyer, labor counseling attorney

Sunny Sohn is an associate in the Labor & Employment Law Department and a member of the firm’s Employment Litigation & Arbitration Group.

Sunny represents clients before federal and state courts as well administrative agencies including the Equal Employment Opportunity Commission, the Department of Labor, the National Labor Relations Board, and the Illinois Department of Human Rights.

She counsels employers in a variety of industries, including manufacturing, construction, transportation, hospitality, consulting...