What Are Recent Developments In Illinois Non-Compete Law?

In recent years, the law on noncompete agreements has shifted considerably nationwide, and Illinois is no exception. This is primarily the effect of a recent rule issued by the Federal Trade Commission (FTC), the federal agency that enforces antitrust law and promotes consumer protection. This rule was struck down by a federal court before it took effect. 

However, Illinois legislation enacted in the last few years already limits the ability of employers to put in place and enforce non-compete clauses in their employment agreements. An experienced Illinois employment law attorney can advise you on the state of non-compete law in Illinois.

How Do Non-Compete Clauses Work?

Non-compete clauses, also called covenants not to compete, are sometimes put in place by employers in employment agreements to prevent an employee from competing with an employer or starting a similar business for a period of time after leaving the employment. These are called “restrictive covenants” because they restrict the ability of an employee to work in a similar capacity for a competitor of the employer for a certain period of time or in a certain geographic location. 

The FTC Rule That Was Struck Down 

The FTC issued a rule banning most non-compete agreements. This rule was to take effect on September 4, 2024, but a federal court concluded that the rule could not be enforced on August 20, 2024. The rule would have put in place a number of significant changes to non-competes, including: 

• Prohibiting employers from entering into non-compete agreements with employees, independent contractors, and interns. 
• Ensuring that companies actively terminate any on-compete agreements and let employees know. 
• The rule did provide some exceptions, such as in the sale of a business or for “senior executives.”

The federal court that struck down the law said that the FTC did not have the legal power to ban non-competes nationwide. Unless this ruling is appealed and overturned, the FTC rule will not have any effect. 

After All These Developments, What is the Law On Non-Competes in Illinois?

Since the federal court struck down the FTC rule, there is no complete ban on non-compete agreements or clauses in Illinois. However, Illinois state law does restrict non-compete agreements. In 2022 Illinois passed the Freedom to Work Act (IFTWA) a law that restricts the ability of employers to impose non-compete agreements on employees making less than $75,000 a year. This amount will increase by $5000 every 10 years. 

This law also forbids employers from entering into a non-compete agreement or covenant that restricts employees from competing if they are laid off due to the COVID-19 pandemic or similar circumstances. 

The Bottom Line On Illinois Non-Competes

Currently, employers in Illinois may enter into non-compete covenants with their employees, with a few restrictions set forth in Illinois law that mostly affect employees making under $75,000 a year.

Contact a Naperville, IL Employment Agreement Lawyer

As the law on non-compete agreements continues to change nationwide and in Illinois, experienced attorney Denice Gierach at the Gierach Law Firm can advise businesses on the legal and compliance requirements regarding non-compete clauses and agreements. When you choose a Naperville, IL employment agreement lawyer you take the first step to ensure that your business is legally protected. Call 630-228-9413 today to schedule a meeting.