Effective January 1, 2022, the Illinois Freedom to Work Act (IFWA) adopted changes to limit the scope of restrictive covenants in employment contracts. While the law codifies substantive common law principles of restrictive covenants, it also sets forth new limitations regarding the use of non-compete and non-solicitation agreements.
For example, prior to January 1, 2022, non-competition and non-solicitation covenants had no salary limitation. With the recent changes non-competition covenants are now only enforceable against individuals making more than $75,000 per year, while non-solicitation covenants only apply to individuals making more than $45,000 per year.
In addition, non-competition and non-solicitation covenants are only enforceable if the individual receives adequate consideration at the time of execution of the covenant or after the individual has worked for the company for a minimum of two years.
Finally, employees must be given at least 14 days to review the restrictive covenant agreement, and employers must inform employees in advance of signing about their right to consult with an attorney.
The statute further defines other common law principles, such as “legitimate business interest” for purposes of restrictive covenants. Importantly, the statute allows a prevailing employee to recover costs and attorneys’ fees if the employer is unsuccessful in their suit to enforce the non-competition or non-solicitation covenant.
Although the new standards will not apply retroactively to any restrictive covenants made prior to January 1, 2022, companies should review their standard employment contracts and update any provisions to be in accordance with the new restrictions moving forward.
If you have questions regarding the use of non-competition or non-solicitation covenants in employment contracts, please contact the attorneys at Rock Fusco & Connelly, LLC.