Proposed Bill Would Ban Employee Non-Compete Agreements in Illinois
On February 6, Representative Natalie Manley filed House Bill 4699 with the Illinois House of Representatives. If enacted, the bill would amend the Illinois Freedom to Work Act (“IFWA”) with respect to the legality of non-compete agreements. Currently, under the IFWA, employers are prohibited from entering into non-compete agreements with low-wage employees. Low-wage employees are those whose earnings do not exceed the greater of either the minimum hourly rate or $13.00 per hour. HB4699 would amend the Act to remove the “low-wage” requirement and prohibit employers from entering into covenants not to compete with any employee.
The Bill broadly defines a “covenant not to compete” as “an agreement between an employer and an employee that restricts the employee from performing:
(A) any work for another employer for a specified period of time;
(B) any work in a specified geographical area; or
(C) work for another employer that is similar to the employee’s work for the employer included as a party to the agreement.”
HB4699 follows a wave of states considering legislation meant to limit the use of non-compete agreements. Washington State, for instance, recently enacted legislation which prohibits non-competes against: (1) employees earning less than $100,000 per year; (2) employees who are terminated as the result of a layoff, with limited exceptions; and (3) independent contractors earning less than $250,000 per year. Massachusetts also recently enacted legislation limiting the use of non-compete agreements, which we previously discussed in an article from 2018. HB4699, however, proposes a less tempered approach and would place Illinois in the minority of states that ban non-compete agreements outright. This “all or nothing” approach more closely mirrors California, Oklahoma and North Dakota.
Notably, similar bills have been introduced in Illinois in the past without success. However, with a democratic governor now in office, it is possible HB4699 may garner greater attention and traction this time around. We will continue to monitor HB4699 and provide additional information as it becomes available.