Navigating Restrictive Covenants & Non-Compete Agreements: What Illinois Employers and Employees Should Know

As an employer, you need to train your people so they can do their jobs correctly. However, providing them with that training and then having them leave and set up their own business definitely conflicts with your business’s interests. That’s where non-compete and non-solicitation agreements (collectively known as restrictive covenants) can help.

What Are Restrictive Covenants?

Restrictive covenants are contracts that limit an employee’s ability to:

• Compete with their former employer within a certain geographic area and time.
• Solicit the employer’s clients or other employees after leaving the company.

Illinois’s Legal Framework

The Illinois Freedom to Work Act (IFWA) governs the enforceability of these agreements. Key provisions include:

• Non-compete agreements are enforceable only if the employee’s actual or expected annualized earnings exceed $75,000. That increases every five years, reaching $80,000 in 2027, $85,000 in 2032, and $90,000 in 2037.
• These are enforceable if the employee’s earnings exceed $45,000, with the same type of incremental increases every five years.
• Employers have to provide sufficient consideration for these agreements to be enforceable. Typically, continued employment for at least two years is enough.
• Employers have to advise employees in writing to consult with an attorney before signing a non-compete or non-solicitation agreement.

Recent Legal Developments

• The Federal Trade Commission (FTC) issued a rule banning most non-compete agreements nationwide. However, a federal court struck down this rule in August 2024, stating that the FTC lacked the authority to enforce such a ban.
• Illinois has introduced bills limiting the enforceability of non-compete and non-solicitation agreements, particularly concerning licensed mental health professionals serving veterans and first responders.

What Employers Should Know

• Double-check that any non-compete or non-solicitation agreements comply with current income thresholds.
• Make sure you’re offering enough consideration for the agreements to be enforceable.
• Get experienced legal help with drafting or enforcing these covenants.

What Employees Should Know

• Know the income thresholds and other conditions that affect the enforceability of non-compete and non-solicitation agreements.
• If you’re asked to sign such an agreement, talk to an attorney to make sure you understand everything.
• Understand that the terms of these agreements are flexible until the contract is signed.

Moving Forward for Employers and Employees

Illinois’s landscape for non-compete and non-solicitation agreements is complex and not getting any simpler. Both employers and employees need to keep abreast of current laws and regulations. Gandhi Selim Law is here to help navigate the details with clarity and confidence in non-compete and non-solicitation agreements .