Illinois Prohibits Non-Compete Agreements for Low Wage Employees

The Illinois Freedom to Work Act, effective January 1, 2017, will prohibit private sector employers from entering into a non-compete agreement with employees earning a “low-wage.” A “low-wage employee” is defined by the Act as an employee who earns the greater of: (1) the hourly rate equal to the minimum wage required by the applicable federal ($7.25 per hour), state ($8.25 per hour) or local ($10.50 per hour under the Chicago Minimum Wage Ordinance) minimum wage law; or (2) $13 per hour. Thus, as no applicable minimum wage currently exceeds $13 per hour, the law will apply to workers who make $13 per hour or less.

The prohibited agreements – referred to in the Act as covenants not to compete – are defined to include those that restrict the low-wage employee from performing: (1) any work for another employer for a specified period of time; (2) any work in a specified geographical area; or (3) work for another employer that is similar to the employee’s work for the employer included as a party to the agreement. It is important to note that the Act does not affect an employer’s right to protect confidential information and trade secrets through confidentiality agreements with any worker, including low-wage employees.

Illinois employers should discontinue utilizing agreements involving low-wage earners that include time and/or geographic restrictions or limit the employee’s ability to perform “similar” work for another employer. In addition to the issue of how broadly the term “similar work” will be interpreted, an unanswered question is how the law will affect non-solicitation agreements that restrict a low-wage employee’s ability to solicit either customers or other employees. As the Act does not expressly address this issue, Illinois employers must wait to see how broadly the courts interpret the law’s definition of “covenant not to compete.”

The St. Louis employment attorneys at McMahon Berger have been representing employers across the country in labor and employment matters for sixty years and are available to discuss this issue and others. As always, the foregoing is for informational purposes only and does not constitute legal advice regarding any particular situation as every situation must be evaluated on its own facts. The choice of a lawyer is an important decision and should not be based solely on advertisements.