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Top 5 Takeaways for Illinois Employers from New Law Governing Non-Compete Agreements

On August 13, 2021, Governor J.B. Pritzker signed into law an amendment to the Illinois Freedom to Work Act which makes many significant changes to the enforceability of non-compete clauses in employment agreements. Here are just five items for Illinois employers to note:

  1. Effective date. The law will affect employment agreements entered into after January 1, 2022.
  2. Earnings threshold. Non-compete agreements are prohibited for employees who have actual or expected “earnings” of $75,000 per year or less. This threshold will increase evert five years until it reaches $90,000.
  3. Notice and review provisions. Employers will have to advise employees in writing to consult with an attorney before entering into a non-competition or non-solicitation agreement and provide a copy of the agreement to the employee at least 14 days to review the agreement before the employment is set to start.
  4. Adequate consideration required. A non-compete agreement must be supported by adequate consideration, which the amendment defines as either: (i) two years of continuous employment after the non-competition agreement is signed, or (ii) employment for “a period of employment” plus additional benefits that are “adequate by themselves.”
  5. Fee-shifting provision for prevailing employees. If an employer brings an action or arbitration to enforce a non-compete clause, the employee will have a right to recover their costs and attorneys’ fees if the employee prevails in the action or arbitration.

Illinois employers can click on this link to access the full text of the amendment and should call Dalton & Tomich at 815-986-8050 if they would like an attorney to review their employment contracts before January 1, 2022.

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