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Legislative Update: Some Non-Compete Agreements Unenforceable Under New Illinois Law

New Law Affects Non-Compete Agreements for Employees earning less than $13 per hour

Today, many employers use non-compete agreements to protect their company’s business. As such, the issue is always whether or not a non-compete agreement is enforceable for the Company. Now, in Illinois, there is a clear directive as to certain employees that the non-compete agreement is NOT enforceable by Illinois law. On August 19, 2016, Illinois Governor Bruce Rauner signed into law the Illinois Freedom to Work Act, effective January 1, 2017.

What is a covenant not to compete under this law?

An Agreement between an employer and a low wage employee that restricts such low wage employee from performing:

· Any work for another employer for a specified period of time

· Any work in a specified geographical area, or

· Work for another employer that is similar to such low-wage employee’s work for the employer as a party to the agreement.

What is the effect of the law?

Such agreements entered into after the effective date of this law, January 1, 2017, ARE ILLEGAL AND VOID.

What EMPLOYERS are covered under this law?

“Employer” includes any individual, partnership, association, corporation, limited liability company, business trust, or any person or group of persons acting directly or indirectly in the interest of an employer in relation to an employee, for which one or more persons are gainfully employed on some day within a calendar year. “Employer” does NOT include governmental or quasi-governmental bodies.

What low-wage EMPLOYEES are covered under this law?

An employee who earns less than $13 an hour.

Note: This law does NOT bar all non-compete agreements in Illinois, but rather, it restricts the use of such agreements with certain employees.

Employers may want to review their use of non-compete agreements with regard to their business.

Questions? Contact Attorney Anthony Caruso at Wessels Sherman St. Charles office at (630) 377-1554 or by email at ancaruso@wesselssherman.com.

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