A Flurry of Changes to Employment Law
With the pandemic increasingly in the rear-view mirror, 2021 stands to be a blockbuster year for changes to employment law. Many of these laws aim to rectify perceived imbalances between workers and their employers. In this edition of the Rock Fusco & Connelly, LLC newsletter, we will explore the state and federal changes to employment law, and end with a brief summary of laws that went into effect July 1, 2021.
Illinois Passes Sweeping Reform to Non-Compete and Non-Solicitation Clauses
The Illinois legislature recently passed SB672, a comprehensive non-compete bill which is generally viewed as a compromise between employer and employee interest groups, which will become effective January 1, 2022. One of the most significant changes is implementing income thresholds for non-compete and non-solicitation agreements. Beginning on January 1, 2022, Employers can only enforce non-compete provisions where an employee’s annualized earnings exceed $75,000, and this threshold increases by $5,000 every five years until 2037. This income threshold does not apply to provisions regarding confidentiality or disclosure of trade secrets or inventions. The threshold differs from non-solicitation clauses, in which these provisions lower the threshold to $45,000 per year, increased by $2,500 every five years until 2037.
SB672 also prohibits employers from enforcing a non-compete or non-solicitation covenant with any employee who an employer terminates, furloughs, or lays off as the result of business circumstances or governmental orders related to COVID-19. Additionally, it prohibits non-compete covenants for individuals covered by a collective bargaining agreement under the Illinois Public Labor Relations Act, the Illinois Educational Labor Relations Act, and certain individuals employed in the construction industry. However, SB672 specifically provides that employers can enforce non-compete provisions against those employees employed in the construction industry who primarily perform management, engineering or architectural, design or sales functions for the employer, or are a shareholder partner, or owner so long as their compensation meets the threshold described above.
This bill also added two requirements for employers seeking to enforce non-compete and non-solicit clauses: 1) the employer must advise the employee in writing to consult with an attorney prior to the agreement, and 2) the employer must provide the employee with a copy of the covenant. Furthermore, the bill provides that employees shall receive attorney’s fees if they prevail on a claim of non-competition or non-solicitation.
This legislation also defined an employer’s “legitimate interest” and the standard for enforceability. This approach provides that, while exposure to “near-permanent” client relationships and the possession of confidential information are legitimate interests, there is no limit as to what a protectable interest can be. Rather, the bill incorporated a “totality of the circumstances” test for these cases. Once the interest is identified, the restrictions must be reasonable. For instance, the court may consider whether the restrictions are more burdensome than necessary to protect the interest, or whether the limitations are injurious to the public. These provisions codified the approach that Illinois courts have followed.
Finally, this bill codified existing law regarding the reformation of overbroad covenants. While “extensive judicial reformation” of a non-compete or non-solicit covenant in an employment agreement may be against the public policy of the State of Illinois, a court may exercise its discretion to modify or sever an unreasonable or overbroad restriction. Factors to be considered include the fairness of the restraints as originally written, whether the restriction reflects a good-faith effort to protect a legitimate business interest, the extent of modification, and whether the parties included a clause that authorizes such modifications.
These amendments apply to any restrictive covenant agreement entered into after January 1, 2022. Employers should make sure any new contracts fully comply with the new bill.
For further assistance or information relating to restrictive covenant contracts, please reach out to the attorneys at Rock Fusco & Connelly, LLC.
With the Signing of SB1847, Illinois Revamps Equal Pay Reporting
Following Governor Pritzker’s signing of SB1847 on June 25, 2021, private sector businesses with 100 or more employees in the State of Illinois (“Covered Businesses”) will be required to obtain an “equal pay registration certificate” from the Illinois Department of Labor (“IDOL”) by filing an application with various extensive disclosures and certifications with details about its workers and their pay. The change will require the IDOL to collect contact information from existing and new Covered Businesses (businesses that become newly covered must submit their contact information to the IDOL by January 1 of the following year), after which the IDOL will assign each Covered Business with a deadline by which it must apply for its equal pay registration certificate. For existing covered businesses, that deadline may be as early as March 24, 2022 or as late as March 23, 2024. Covered Businesses that commenced operations in Illinois after March 23, 2021 will be assigned a deadline of no earlier than January 1, 2024. Thereafter, each Covered Business must recertify every two years after their initial certification, with the recertification deadlines being determined by the IDOL.
For more information on whether your business is subject to the requirements of SB1847 or for information or assistance with reporting and disclosure requirements, please reach out to the attorneys at Rock Fusco & Connelly, LLC.
New Illinois Laws Effective July 1, 2021
At the beginning of this month, a host of new laws took effect in Illinois of which residents and business-owners should be aware.
Chicago minimum wage law
While not affecting the entire state, on July 1, employers in the City of Chicago saw the minimum wage increase to $15 per hour. Companies that employ more than twenty workers are required to increase wages to $15 per hour. If the company employs between four and twenty employees, the minimum wage is $14. Chicago restaurant employees who receive tips will now earn a base wage of $9 per hour, with employers required to make up the difference to reach the overall $15 per hour through tips. Beginning in 2022, the minimum wage in Chicago will be tied to the consumer price index, increasingly annual based on the price of goods, capped at an annual change of 2.5%.
New vote by mail law
The 2020 election saw multiple expansions of vote-by-mail and drop box locations for absentee voting due to the COVID-19 pandemic. A new law signed by Governor Pritzker makes those expansions permanent. The new law lays out procedures for curbside voting during early voting or on Election Day. The measure also creates permanent voting lists where voters can opt in or out of receiving a mail ballot for every election. Along with changes to vote-by-mail, each jurisdiction will establish one central polling place, where all voters, regardless of precinct, may vote. Pritzker said, “This legislation further expands access to the ballot box – ensuring all Illinoisans’ voices are heard.”
Electronic signature law
The new Uniform Electronic Transaction Act provides that if a law requires a signature in writing, an electronic record satisfies the law. A contract, record, or signature may not be denied legal enforceability simply due because it contains an e-signature or is in electronic form. This makes Illinois the 49th state to adopt such e-signature measures and should simplify e-commerce transactions for certain fields/businesses.
Increased school funding
Better than expected revenues in Illinois allowed for an increase in the funding for K-12 education. An additional $350 million will go towards education this fiscal year, bringing the total spending on education to $9.2 billion – just over 21% of the state’s annual budget.
Gas tax increases
Illinois’ motor fuel tax rate increased by a half cent on July 1, from 38.7 cents per gallon to 39.2 cents per gallon. This is a minor increase compared to 2019, where the gas tax doubled from 19 cents per gallon to 38 cents per gallon to fund major improvements to state infrastructure.
The revenue from the 2021 tax increase will be split between three uses: 48% to construction of roads and bridges, 32% to local governments, and 20% to local transit districts.
For answers to your questions regarding the new laws that took effect July 1, please reach out to the attorneys at Rock Fusco & Connelly, LLC.