Illinois Freedom To Work Act
The Illinois Freedom to Work Act officially went into effect January 1, 2022. This employment legislation impacts many new “non-compete” clauses you might have in your employment contracts.
The meat of the new legislation is regarding non-compete clauses. These clauses are often added to employment contracts to prevent employees from leaving their employer and going to work for a competitor.
These clauses have been difficult to enforce in Illinois and The Illinois Freedom to Work Act now makes it illegal to add a non-compete to a contract under certain circumstances.
New Restrictions
These are the restrictions on any new contracts signed on and after January 1, 2022:
- New non-competes are only valid for employees with minimum annual earnings of $75,000. The threshold increases every five years by $5,000 until 2037, when the amount will equal $90,000. “Earnings” includes total compensation such as salary, bonuses and commissions, tips, and deferred compensation like 401(k).
- At-will employees must receive a specific benefit, like a signing bonus, for signing non-compete or non-solicit restrictions. If there is no sign on benefit, the non-compete is unenforceable unless the employee works for 2 years after signing.
- Employers are required to advise employees to consult with an attorney and they must allow a 14 day window for them to do so.
- If employees are furloughed, terminated, or laid off due to business circumstances or due to government orders related to COVID, a non-compete can’t be enforced against employees unless they receive severance pay for the entire period.
- If an employer unsuccessfully sues an individual to enforce restrictions, they must pay the employee’s attorney fees.
Next Steps
Whether you’re an employer or an employee, this is something you need to be aware of for any new employment contracts under consideration in 2022.
If you’re an employer, take time now to review and update employment contracts, noncompete/restrictive agreements, and severance agreements accordingly.
For more information on the Illinois Freedom To Work Act, please visit the website for the Illinois General Assembly.