New Illinois Law on Non-Compete and Non-Solicitation Agreements

Practice Areas

By: Krishnakala Busani

New Illinois law imposes stringent restrictions on employee non-compete and non-solicitation agreements signed after January 1, 2022. It is important to work closely with an attorney to ensure that your contracts comply with the new law.

Starting January 1, 2022, Illinois employers cannot enter non-compete or non-solicitation agreements with employees who make less than a certain amount per year. The minimum salary requirements for these agreements will increase until 2037 as follows: $5,000 every five years for non-compete agreements, and $2,500 every five years for non-solicitation agreements.

The below table displays the minimum annual employee salary required for non-compete and non-solicitation agreements in Illinois for each time period.

 

Non-compete agreements

Non-solicitation agreements

January 1, 2022 – December 31, 2026

$75,000 per year

$45,000 per year

January 1, 2027 – December 31, 2032

$80,000 per year

$50,000 per year

January 1, 2032 – December 31 2036

$85,000 per year

$52,500 per year

In addition, an Illinois employer cannot enter a non-compete or a non-solicitation agreement with any employee that the employer terminates due to the COVID-19 pandemic, unless the non-compete agreement provides the employee compensation equal to the employee’s base salary at the time of termination for the duration of the agreement, less any compensation earned through subsequent employment.

Finally, Illinois employers must advise their employees in writing to consult with an attorney before entering non-compete and non-solicitation agreements. The employer must provide the employee with a copy of the agreements at least 14 calendar days before the beginning of employment or provide at least 14 calendar days to review the agreements.

The new restrictions apply only to agreements entered after January 1, 2022 and will not impact non-compete and non-solicitation agreements signed before that date.

In addition, employers should be aware of Illinois’s pre-existing requirements for non-compete or non-solicitation agreements. Generally, an employer must demonstrate that a non-compete or a non-solicitation agreement (1) is no greater than is required for the protection of a legitimate business interest of the employer; (2) does not impose undue hardship on the employee; and (3) is not injurious to the public.

conclusion
Employers should have an attorney review their non-compete and non-solicitation agreements. Chugh, LLP can further assist you in auditing your employment practices to ensure your compliance with all applicable laws.

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