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Illinois Bars Use of Non-Compete Agreements for Low Wage Workers

Non-compete agreements were originally created as a way for businesses to prevent competitors from poaching their employees. If a high-level executive who knows a lot about the company’s trade secrets and/or has established valuable relationships with clients takes those assets to a competitor working just around the corner, the result could be disastrous for the worker’s former employer.

In order to prevent that from happening, most employers include non-compete agreements in almost all their employment contracts. These agreements usually specify a geographical area in which the employee cannot work for a competitor in a given time frame (usually six months to a year).

Although non-compete agreements can be an effective way for companies to protect their legitimate business interests, some companies have become overzealous in their attempts to hold on to their workers and have included non-compete agreements in all their employment contracts, even with their lowest-paid employees.

Federal law does not prohibit companies from requiring their workers to sign non-compete agreements or put any restrictions on what can be included in those agreements. State labor laws, on the other hand, vary considerably, with some allowing all non-compete agreements, some placing restrictions on such contracts, and a few (notably California) that outlaw all such agreements.

Illinois has recently joined the ranks of states that place restrictions on the kinds of non-compete agreements that can be enforced. According to the state’s new Freedom to Work Act, employers will be banned from including non-compete agreements in their employment contracts with low-wage workers. The Act defines “low-wage employees” as those who earn less than either an hourly wage of $13.00 or the applicable minimum wage for the area, depending on which is higher. Since the minimum wage in Illinois is currently less than $13.00 per hour, the new legislation will apply to all workers earning $13.00 per hour or less.

The Act defines non-compete agreements as any agreement between a low-wage worker and their employer that prohibits the worker from doing any work for another employer for any certain time period; work for another employer that is similar to the employee’s work for the employer with which they have the non-compete agreement; or work in a certain geographical area.

The new legislation will render all such agreements entered into with low-wage workers after January 1, 2017 unenforceable.

The Act is Illinois’s newest attempt at protecting low-earning workers who already have little-to-no leverage against their employers. Although candidates technically have the option to refuse to sign a non-compete agreement, if the employer makes signing the contract a condition of employment, it’s really no choice at all for those who need a way to pay the bills. It further puts these workers in a tight spot when the economy is struggling and job opportunities are hard to come by, or even when jobs are plentiful but all or most of the employers in the area are using non-compete agreements in their employment contracts.

In practice, though, employers rarely bother to enforce non-compete agreements with their low-level workers, so whether the new Illinois legislation will have much of an effect has yet to be determined.

Our Chicago non-compete agreement, employment law and business dispute attorneys have defended high level executives in covenant not to compete and trade secret lawsuits. A case in which our firm defended a former Motorola executive was covered in Crain’s Chicago business. You can view that article by clicking here.

DiTommaso-Lubin a firm of Chicago business dispute lawyers handles litigation over non-compete clauses for individuals and businesses of all sizes, including small or closely held businesses for whom competition from an ex-employee can be a serious threat. Our Chicago business lawyers with offices near Downers Grove, Oak Brook and Chicago have substantial experience in restrictive covenant and breach of contract cases, and we are proud of our record of strong results.

DiTommaso-Lubin a Chicago business litigation law firm represents both plaintiffs and defendants in such cases, and can also help stop litigation before it starts by reviewing contracts to look for covenants and clauses that could create problems later. Our firm has also handled many shareholder and LLC disputes between owners of closely held corporations, and LLCs.

Based in Oakbrook Terrace and downtown Chicago, our Lombard and Palatine non-compete clause and business dispute lawyers take cases from Skokie and Evanston and many other cities throughout Illinois, as well as in Indiana, Wisconsin and the entire United States. To learn more or set up a free consultation, please contact one of our Chicago business dispute lawyers through the Internet or call toll-free at 1-877-990-4990 today.