Reminder: Illinois Restrictive Covenant Law Takes Effect on January 1, 2022
As we previously reported, a new amendment to the Illinois Freedom to Work Act (820 ILCS § 90) regarding the use of non-competition and non-solicitation restrictive covenants for Illinois employees will take effect on January 1, 2022.
The law imposes certain restrictions on the use of restrictive covenants that are entered into after January 1, 2022, including:
The law prohibits employers from entering into non-competition agreements with employees who earn $75,000 per year or less, and also prohibits employers from entering into non-solicitation agreements with employees who earn $45,000 per year or less.
For non-compete agreements, the salary threshold amounts will increase every five years by $5,000 until January 1, 2037, when the amount will equal $90,000. For non-solicit agreements, the salary threshold amounts will increase every five years by $2,500 until January 1, 2037, when the amount will equal $52,500.
Employers will now be required to advise employees to consult with an attorney before entering into a non-compete or non-solicit agreement, and must also provide employees at least 14 days to review the agreement and decide whether to sign it. Employees have the option of signing the agreement before the 14-day period has ended.
Employers are prohibited from entering into non-compete or non-solicit agreements with any employee who an employer terminates or furloughs or lays off as the result of business circumstances or governmental orders related to the COVID-19 pandemic or under circumstances that are similar to the COVID-19 pandemic, unless enforcement of the covenant not to compete includes compensation equivalent to the employee’s base salary at the time of termination for the period of enforcement minus compensation earned through subsequent employment during the period of enforcement.
As the deadline quickly approaches, Illinois employers should revisit their restrictive covenant agreements to ensure compliance with the new law.