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خانه / Non Compete Illinois Law

Non Compete Illinois Law

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Employers should also assess their practices, which may affect applicability under the law. For example, employers must ensure that they plan the entire 14-day review period before requiring employees to sign non-compete clauses and solicitation prohibitions. Employers should also consider how to determine whether an employee`s total income meets the legislated monetary coverage thresholds and whether all the consideration promised in support of the agreement in question has been provided to the employee. Finally, the law`s prohibitions mean that strong confidentiality and non-disclosure agreements with enhanced oversight regulations are even more important than before. Fifth, SB672 imposes potential liability or risk of litigation or investigation on employers seeking to enforce unenforceable prohibitions of competition or solicitation. Specifically, in addition to monetary thresholds, the new law requires that a non-compete agreement or non-advertising agreement meet the following criteria: (1) the employee receives reasonable consideration, (2) the undertaking is in addition to a valid employment relationship, (3) the undertaking is no greater than necessary to protect a legitimate business interest of the employer, (4) the covenant does not impose unreasonable hardship on the employee, and (5) the Covenant is not harmful to the public. The amendment also aims to ensure that employees are informed of their obligations by requiring employers to inform employees in writing of the need to consult a lawyer prior to a non-compete obligation. The law also requires the employer to provide the employee with a copy of the agreement at least 14 days before hiring or at least 14 days before the exam. Blue Pencil Clauses. Employers often rely on a “savings clause” (called in legal jargon a “blue pencil” clause) to make an otherwise overly broad non-competition clause enforceable. This can make it even more difficult (for both individuals and lawyers) to determine whether a non-compete obligation is found to be enforceable by the courts (in whole or in part). Currently, Illinois law prohibits employers from entering into non-compete agreements with employees earning $13.00 per hour or less.

The new law prohibits non-compete obligations for employees earning $75,000 a year or less. The law also prohibits customer and employee prohibition agreements for employees earning $45,000 a year or less. These wage thresholds increase over time (until 2037) to account for inflation. Over the past 10 years, states across the country have adopted measures that impose new requirements and restrictions on employers who wish to enforce non-compete obligations with their workforce. In 2016, Illinois signed into law the Freedom to Work Act (IFWA), which prohibits employers from entering into or enforcing non-compete clauses with employees considered “low wages.” Now, five years after IFWA, Illinois has returned to the table to codify additional requirements for the enforcement and use of restrictive covenants in line with the national trend. Third, and most importantly, SB672 codifies Illinois jurisprudence regarding the appropriateness of the non-solicitation and non-competition provisions, provided that the non-compete obligations and solicitation prohibitions are void and unenforceable unless employers are encouraged to speak to counsel before the law takes effect on January 1, 2022. Littler`s Unfair Competition and Trade Secrets Practice Group will continue to monitor legislative changes in Illinois and across the country as more and more non-compete clauses are introduced at the national and national levels. In a 2013 decision, an Illinois appeals court ruled that all-you-can-eat employment alone is not a sufficient consideration for a post-employment non-compete obligation. Since then, Illinois state courts have typically required at least two years of tenure, or some form of financial consideration, to support a non-compete clause. Federal courts were more flexible, but employers did not have clear guidelines on the issue of review.

Employers must also give employees appropriate notice and time to determine whether they wish to enter into a non-compete clause or a non-solicitation clause. For a non-compete clause or solicitation to be valid, the employer must notify the employee in writing to consult with a lawyer before entering into the contract and give the employee at least 14 calendar days to review the agreement (the employee does not have to wait the full 14 days before signing). One of the few aspects of the law that appears relatively employer-friendly is the exclusion of “garden leave” type agreements, which mutually require employers and employees to resign before termination of employment, after which the employee remains (but does not work) a paid employee for the duration of the notice period. Such agreements are theoretically directed against an employee about whom an employer is concerned about competition, but do not involve the same complexity in terms of the protection of legitimate business interests, consideration or the relevance of restrictions. In the future, Illinois employers may want to evaluate these agreements as an alternative to non-compete obligations. Although the law restricts non-compete clauses against “low-wage workers”, it is less clear whether the law also applies to non-solicitation clauses (as discussed above, solicitation prohibitions are intended to discourage employees from soliciting other employees and/or clients of the employer, as opposed to non-compete clauses relating to the exclusion of a worker from working for a competing employer). The passage of this bill was influenced by recent news — and outrage — from the Illinois-based Jimmy John`s franchise, which had required its sandwich manufacturing workers to sign non-compete clauses that those employees would be banned from working for another sandwich shop within a two-mile radius — which also prompted the news to take action against Jimmy John`s. Where non-compete obligations and solicitation prohibitions are permitted, to be enforceable, they must meet certain requirements: restrictions based on employees` salaries are not the only new requirements. The law also prohibits the application of non-competition and solicitation with employees who have been dismissed, laid off or laid off due to business circumstances or government orders related to the COVID-19 pandemic or in circumstances similar to the COVID-19 pandemic. However, the law allows employers to circumvent this restriction if, during the period of performance of the non-compete obligation, the employer pays the employee concerned his basic salary at the time of dismissal less any remuneration that the employee receives from other sources during that period. The amendment provides that non-compete obligations and solicitation are unlawful and void unless: (1) the employee receives reasonable consideration (see below); (2) the agreement is ancillary to a valid employment relationship; (3) the agreement is no greater than necessary to protect a legitimate business interest of the employer (see below); (4) the agreement does not impose unreasonable prejudice on the employee; and (5) the alliance is not detrimental to the public. On May 31, 2021, the Illinois Legislature passed SB672, which Governor Pritzker signed into law on August 13, 2021.

SB672 makes profound changes to IFWA in several ways. The 2016 IFWA – only 200 words – prohibits employers from entering into non-compete agreements with “low-wage workers” defined under this Act as employees earning less than (a) the highest of the applicable minimum wage under local, state or federal law; or (b) $13.00 per hour. Among other things, SB672 significantly modifies and extends this threshold, imposes new restrictions on employers with respect to their use of non-compete obligations and non-solicitation clauses (the requirements for solicitation prohibitions were not codified by the former IFWA), clarifies the requirements for the applicability of non-compete obligations and non-solicitation clauses, and imposes possible liability on employers who wish to enforce non-compete obligations and solicitation prohibitions, who want to enforce non-compete obligations and non-solicitations. Impracticable.. .

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