September 17, 2021 | Legal News

Illinois Creates New Restrictions on Employee Non-Competes

Illinois recently amended its Freedom to Work Act to significantly limit post-employment noncompetition covenants. Beginning January 1, 2022:

  • Employers cannot enter into any new non-competition agreements with employees earning $75,000 or less or non-solicitation agreements with employees earning $45,000 or less.
  • Agreements that are not otherwise prohibited must provide “adequate consideration,” which can consist of a period of employment plus additional professional or financial benefits, additional benefits that are adequate in themselves, or a safe harbor for employees who work for the employer at least two years after signing the restrictive covenant.

The amendment does not apply directly to the franchisor and franchisee relationship, which historically Illinois courts have not treated as an employment relationship for purposes of non-compete provisions. But the amendment very may impact Illinois franchisees’ ability to retain key employees by means of a non-competition covenant. Franchisors that require franchisees to use a specific form of non-compete and non-solicitation agreements with their employees should also be aware of the impact of this new law on franchisees in Illinois.

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