With the advent of the new calendar year just a few weeks ago, the State of Illinois continued its path of being one of the most progressive states in the country in terms of limiting the permissible scope of noncompete and nonsolicitation agreements for employees, as its Freedom to Work Act became law.
Some of the Highlights of the Freedom to Work Act
- The new law replaces the existing threshold that bars noncompete agreements for employees earning less than $13 per hour with a staged framework, whereby the baseline threhsold starts at $75,000 in annual salary as of 2022, and then rises in increments of $5,000 every five years, up to $90,000 in annual salary beginning in January, 2037.
- In a slightly different, albeit parallel vein, employers will be barred from holding employees to nonsolicitation agreements where they earn less than $45,000 annually, with the baseline threshold rising $5,000 every five years as well.
- Crucially, employers are barred from seeking to enforce a restrictive covenant against a former employee that had been terminated or furloughed due to business circumstances (or circumstances similar to the COVID-19 pandemic) unless the employer continued to pay that employee his/her salary during that period of time. (Important side-note: the employer is permitted to deduct any pay that employee received during that period of time from other places).
- The law is also consistent with what had been - and still is - Illinois law on this subject, and parrots the general requirements for a restrictive covenant to be held valid, including that it remains reasonable in scope and duration, seeks to protect the legitimate interests of a business, is not "injurious to the public," and does not impose any "undue hardship" on the employee.
Takeaways
At first blush, it is really hard to argue that any of the provisions set forth above aren't reasonable. In particular, the new law, while hemming in restrictive covenants, also goes to significant lengths to distinguish nonsolicit provisions from noncompetes, and allows for broader use enforcement of nonsolicit provisions, in deference to the legitimate interests employers have in protecting their business's good will.
