As a business owner, employers have an interest in protecting valuable customer relationships and trade secrets by requiring potential employees to sign non-compete covenants. Non-compete covenants are common, particularly for high-paying employees and within specific professions or fields. However, recent revisions in state and federal law continue to narrow the scope of private employers’ ability to include certain clauses in non-competes.
Due to the changing landscape of non-compete agreements in Illinois, employers should begin to review existing non-compete agreements for enforceability and alter new non-compete agreements to meet the requirements of existing laws. When drafting a non-compete, consider the following four questions:
- Does your company have a national geographic presence?
Many employers wish to include geographic restrictions within standard non-compete agreements. However, doing so creates difficulties for companies with a national geographic presence. In Illinois, geographic restraints must be limited to the area “necessary to protect the employer’s interests.” For example, a clause prohibiting an employee from working for a competitor within a 15-mile radius may be acceptable, but a clause prohibiting an employee from working within the entire state of Illinois is likely not enforceable. Courts generally like to see the geographical area drawn as small as possible and must be reasonable under the circumstances. A company with a national geographic presence may need to include a narrower geographic restriction than other, more local companies, and should rely on attorneys to assist them in drafting a restrictive covenant of this nature.
- Is your prospective employee a low-wage employee?
As of January 1, 2017, Illinois law prohibits non-compete agreements between an employer and any low-wage employee. A low-wage employee is an individual that makes either $13 or less per hour or has an hourly rate equal to the minimum wage that federal, state or local minimum wage requires. For all non-compete agreements prior to January 1, 2017, the agreement will be null and void if it restricts a low wage employee from working for another employer for a specified time period, any work in a specified geographic area, and work for another employer that is similar to the low-wage employee’s work.
- Does your company operate within a specific industry?
Illinois law lays out general requirements for all non-compete agreements within the state. However, there may be additional requirements for specific industries or professions. For example, certain fields like broadcasting industry employees and government contractors have additional restraints on non-compete agreements. Be sure to check federal, state, local and industry-specific regulations for non-compete agreements.
- Do you have one general non-compete for all employees?
Many employers only have one standard non-compete form used for all of its employees. Due to changing regulations and case law surrounding noncompete agreements, the best approach is to avoid a one-size-fits-all approach. Employers should tailor their non-compete agreements to each individual employee, and specifically to the risks posed by the position in question. An overly broad non-compete agreement bears the risk of being unenforceable.
To determine whether an existing non-compete is enforceable, or to review the drafting of future non-compete agreements, contact the experienced counsel at Rock Fusco & Connelly, LLC.