The Illinois Freedom To Work Act, 120 ILCS 90/1, et seq. (the “Act”) codifies Illinois law on non-competition and non-solicitation agreements and establishes certain statutory requirements with which employers must comply in order for a non-competition or non-solicitation agreement to be valid and enforceable in Illinois.
Income Thresholds
The Act prohibits employers from entering into a covenant to not compete with any employee unless the employee’s annualized rate of earnings exceeds $75,000.
The Act prohibits employers from entering into a covenant to not solicit with any employee unless the employee’s annualized rate of earnings exceeds $45,000.
Any covenant to not compete or to not solicit entered into in violation of these statutory prohibitions is void and unenforceable.
14-Day Review Period
The Act requires employers to provide employees or prospective employees with at least 14 calendar days to review a covenant to not compete or a covenant to not solicit before entering into the covenant, or provide prospective employees with a copy of the covenant at least 14 calendar days before commencement of employment.
Any covenant to not compete or covenant to not solicit entered into without the employer providing an employee or prospective employee with the mandatory 14-day review period is void and unenforceable.
Advise to Consult with an Attorney
The Act requires employers to advise employees or prospective employees, in writing, to consult with their own attorney regarding the terms of a proposed non-compete or non-solicitation covenant before entering into the covenant.
Any covenant to not compete or solicit entered into without the employer first advising the employee or prospective employee in writing to consult with their own attorney is void and unenforceable.
Consideration
The Act adopts and codifies the so-called 2-year rule for adequate consideration sufficient to support a covenant to not complete or solicit.
Continued at will employment alone cannot serve as adequate consideration sufficient to support a covenant to not compete or solicit unless the employment continues for at least two years after an employee agrees to the restrictive covenant.
Otherwise, to establish adequate consideration, an employer must provide the employee or prospective employee with something else of value, such as a bonus, special payment, promotion or other substantial employee benefit.
Legitimate Business Interests and Reasonableness
The Act also codifies the Illinois common law requirements that a restrictive covenant must be reasonable in scope and necessary to protect an employer’s legitimate business interests.
The Act provides that courts are to consider the totality of the circumstances in determining whether a restrictive covenant is valid and enforceable as a necessary protection of an employer’s legitimate business interests. No single factor is dispositive or carries more weight than another. The inquiry is always fact specific.
The restrictions must be reasonable in time, place and activity scope–no broader than necessary to protect the legitimate business interests.
Attorneys’ Fees
Significantly, the Act requires an employer to pay an employee’s reasonable attorneys’ fees and litigation costs if the employer files a lawsuit against the employee for enforcement of a non-competition or non-solicitation agreement and the employee prevails in the litigation.