In Illinois, non-compete clauses are routinely under some form of attack as employees, employers, legislators, and the judiciary try to balance the freedom of contract against individual workers’ freedoms. Employers typically see non-compete clauses as a way to protect their intellectual properties, trade secrets, and client/customer contacts. Employees often see such clauses as a barrier against earning a living in a field in which they have gained years of experience. Regardless of which side of the fence you may be on, non-compete clauses have become so ubiquitous in employment agreements that they now have started to affect positions for which they were never intended to be used.
One recent example of this phenomenon is the Illinois Attorney General’s lawsuit against the Champaign-headquartered sandwich chain Jimmy John’s. Jimmy John’s employment agreements subjected all of its employees – including its sandwich makers, who were typically minimum wage employees – to the terms of a two-year restrictive covenant. Jimmy John’s subsequently settled the litigation for a payment of $100,000.00 to the State of Illinois and agreeing to hold all of their previous non-compete agreements unenforceable.
Although the full effect of the Jimmy John’s litigation may be relatively minor to Jimmy John’s, it likely influenced Illinois lawmakers who enacted the Freedom to Work Act in August of last year. The Freedom to Work Act, which became effective on January 1, 2017, invalidates these restrictive covenants for “low wage employees.” Low wage employees are defined as employees earning less than $13.00 per hour, or the applicable minimum wage if that rate ever exceeds $13.00 per hour. Notably, the Act only invalidates non-compete clauses entered into after the Act’s effective date. On a national level, non-compete clauses also made headlines this past fall when the Obama administration issued statements criticizing non-compete clauses for lower wage workers or workers who are not privy to trade secrets.
While the Act is clear as to the scope of non-compete clauses that it makes unenforceable, questions as to the enforceability of restrictive covenants in place prior to the Act’s effective date is uncertain and still remain subject to potential legal challenges. Non-compete clauses for low wage employees may still be found unenforceable by a court or other reviewing body. Indeed, the individuals most likely to possess intellectual property, trade secret, and other protected business information are higher level managers and executives, rather than the lower wage employees protected by the Act.
As with any agreement, employment agreements and their non-compete clauses should be reviewed by legal professionals with the skill and experience to identify potential pitfalls and to protect your and your business’s best interests. You can find these legal professionals at Rock Fusco & Connelly, LLC.