by Joseph P. Kelly

On August 13, 2021, Governor Pritzker signed the Freedom to Work Act into law. The new law takes effect on January 1, 2022 and drastically affects the landscape of non-competition and non-solicitation restrictions in Illinois.

Here are the key takeaways:

• Non-competition restrictions are prohibited for employees earning $75,000 per year or less.
• Non-solicitation restrictions are prohibited for employees earning $45,000 per year or less.
• Employers must provided some sort of consideration (cash, vacation, etc.) for non-compete or non-solicit restrictions to be enforceable (unless an employee is employed for at least two years after signing. This isn’t new–the new law just codifies what Illinois courts have said about enforceability.
• Employees must be given at least 14 days to review an agreement with non-compete or non-solicit restrictions.
• The Illinois Attorney General can investigate potential violations and possibly impose civil penalties.
• Employees may recover their attorneys’ fees if they prevail in a suit brought by their employer to enforce non-compete or non-solicit restrictions.
• Non-compete and non-solicitation restrictions aren’t enforceable against employees who lose their job due to Covid-19 or a similar pandemic situation, “unless enforcement of the covenant not to compete includes compensation equivalent to the employee’s base salary at the time of termination for the period of enforcement minus compensation earned through subsequent employment during the period of enforcement.”

Of note–the following will still be permitted:

• Confidentiality agreements.
• Trade secret and IP assignment agreements.
• Agreements entered into in connection with the sale of a business.
• Garden leave (agreements under which advance notice of termination is given, the employee remains employed during the notice period, and the employee receives compensation).
• No “reapplication” provisions – an employer can still prohibit an employee from reapplying for employment after termination.

The new law does not apply retroactively which means that the new law doesn’t apply to non-competition or non-solicitation agreements entered into before January 1, 2022. But after January 1, 2022, it’s a whole new ballgame so Illinois employers would be wise to review their current agreements to consider what changes they need to be making going forward.