A non-compete agreement is an agreement in which one party agrees not to work for a competitor or within a specific industry for a specified period of time and within a specific geographical location.
This agreement may be made in return for employment with the company or some other benefit.
If the party does work for the competitor during the time that the agreement is in effect, the business may be able to take legal action against him or her for violating the agreement.
- Effective January 1, 2022, employers will need to comply with significant new amendments to the Illinois Freedom to Work Act (the Act), a previously narrow statute restricting the use of non-competes with low wage workers.
- Now, employers are prohibited from entering into non-compete agreements with employees who earn less than $75,000 annually. The law defines “earnings” to include salary, bonuses, commissions, “or any other form of taxable compensation.” The threshold increases to $80,000 on January 1, 2027, and by $5,000 every five years thereafter through 2037.
- The new law prohibits non-solicitation restrictions for employees who earn less than $45,000 per year.
- The Act now states that “adequate consideration” means at least two years of continued employment after the agreement is signed or another form of consideration sufficient to support a non-compete.
- For non-competes and non-solicits to be enforceable, employers must now advise employees in writing to consult with counsel before signing the agreement. Additionally, employers must give employees at least 14 calendar days to review a copy of the agreement before they acquiesce to its terms.
Unenforceability (independent contractors)
–often unenforceable against independent contractors who are in business for themselves.
Coupled with the possibility of re-classifying the independent contractor as an employee, the risks often outweigh the benefits of having an independent contractor sign a non-compete agreement.
An independent contractor is expected to work for other businesses and have multiple contracts.
Alternatives to Non-Compete
Other agreements and contracts may protect a business’ legitimate business interests, such as:
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