Illinois General Assembly - Full Text of HB3066
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Full Text of HB3066  102nd General Assembly

HB3066 102ND GENERAL ASSEMBLY

  
  

 


 
102ND GENERAL ASSEMBLY
State of Illinois
2021 and 2022
HB3066

 

Introduced 2/19/2021, by Rep. Kelly M. Burke

 

SYNOPSIS AS INTRODUCED:
 
820 ILCS 90/5
820 ILCS 90/7 new
820 ILCS 90/10
820 ILCS 90/15 new
820 ILCS 90/20 new
820 ILCS 90/25 new
820 ILCS 90/30 new

    Amends the Illinois Freedom to Work Act. Provides that a covenant not to compete shall not be valid or enforceable unless the employee's actual or expected annualized rate of earnings exceeds $75,000 per year on the effective date of the amendatory Act, $80,000 per year beginning on January 1, 2027, $85,000 per year beginning on January 1, 2032, or $90,000 per year beginning on January 1, 2037 (rather than no employer shall enter into a covenant not to compete with any low-wage employee of the employer). Provides that a covenant not to solicit shall not be valid or enforceable unless the employee's actual or expected annualized rate of earnings exceeds $45,000 per year. Provides that a covenant not to compete is void and illegal for any employee who an employer terminates or furloughs as the result of business circumstances or governmental orders related to the COVID-19 pandemic, or under circumstances that are similar to the COVID-19 pandemic, unless enforcement of the covenant not to compete includes compensation equivalent to the employee's base salary at the time of termination for the period of enforcement minus compensation earned through subsequent employment during the period of enforcement. Contains provisions concerning the enforceability of a covenant not to compete or a covenant not to solicit; notice requirements for employers under a covenant not to compete or a covenant not to solicit; remedies for employees who prevail against an employer's civil action to enforce a covenant not to compete or a covenant not to solicit; and certain factors a court may consider when determining whether to reform a covenant not to compete or a covenant not to solicit. Defines "adequate consideration"; "covenant not to compete"; "covenant not to solicit"; "earnings"; and "employee". Removes the definition for the term "low-wage employee".


LRB102 10768 JLS 16098 b

 

 

A BILL FOR

 

HB3066LRB102 10768 JLS 16098 b

1    AN ACT concerning employment.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Freedom to Work Act is amended by
5changing Sections 5 and 10 and by adding Sections 15, 20, 25,
6and 30 and by adding Section 7 as follows:
 
7    (820 ILCS 90/5)
8    Sec. 5. Definitions. In this Act:
9    "Adequate consideration" means (1) the employee worked for
10the employer for at least 2 years after the employee signed an
11agreement containing a covenant not to compete or a covenant
12not to solicit or (2) the employer otherwise provided
13consideration adequate to support an agreement to not compete
14or to not solicit, which could consist of the period of
15employment plus additional consideration or merely other
16consideration adequate by itself.
17    "Covenant not to compete" means an agreement:
18        (1) between an employer and an a low-wage employee
19    that restricts the such low-wage employee from performing:
20            (A) any work for another employer for a specified
21        period of time;
22            (B) any work in a specified geographical area; or
23            (C) work for another employer that is similar to

 

 

HB3066- 2 -LRB102 10768 JLS 16098 b

1        the such low-wage employee's work for the employer
2        included as a party to the agreement; and
3        (2) that is entered into after the effective date of
4    this Act.
5    "Covenant not to compete" also means an agreement between
6an employer and an employee, entered into after the effective
7date of this amendatory Act of the 102nd General Assembly,
8that by its terms imposes adverse financial consequences on a
9former employee if the employee engages in competitive
10activities after the termination of the employee's employment
11with the employer. "Covenant not to compete" does not include
12(i) a covenant not to solicit, (ii) a confidentiality
13agreement or covenant, (iii) a covenant or agreement
14prohibiting use or disclosure of trade secrets or inventions,
15(iv) invention assignment agreements or covenants, (v) a
16covenant or agreement entered into by a person purchasing or
17selling the goodwill of a business or otherwise acquiring or
18disposing of an ownership interest, (vi) clauses or an
19agreement between an employer and an employee requiring
20advance notice of termination of employment, during which
21notice period the employee remains employed by the employer
22and receives compensation, or (vii) agreements by which the
23employee agrees not to reapply for employment to the same
24employer after termination of the employee.
25    "Covenant not to solicit" means an agreement that is
26entered into after the effective date of this amendatory Act

 

 

HB3066- 3 -LRB102 10768 JLS 16098 b

1of the 102nd General Assembly between an employer and an
2employee that (i) restricts an employee from soliciting for
3employment the employer's employees or (ii) restricts an
4employee from soliciting for the purpose of selling products
5or services of any kind to, or from interfering with the
6employer's relationships with, the employer's clients,
7prospective clients, vendors, prospective vendors, suppliers,
8prospective suppliers, or other business relationships.
9    "Earnings" means the compensation, including earned
10salary, earned bonuses, earned commissions, or any other form
11of taxable compensation, reflected or that is expected to be
12reflected as wages, tips, and other compensation on the
13employee's IRS Form W-2 plus any elective deferrals not
14reflected as wages, tips, and other compensation on the
15employee's IRS Form W-2, such as, without limitation, employee
16contributions to a 401(k) plan, a 403(b) plan, a flexible
17spending account, or a health savings account, or commuter
18benefit-related deductions.
19    "Employee" has the meaning ascribed to that term in
20Section 2 of the Illinois Wage Payment and Collection Act and
21includes individuals currently or formerly employed by an
22employer.
23    "Employer" has the meaning given to such term in
24subsection (c) of Section 3 of the Minimum Wage Law.
25"Employer" does not include governmental or quasi-governmental
26bodies.

 

 

HB3066- 4 -LRB102 10768 JLS 16098 b

1    "Low-wage employee" means an employee whose earnings do
2not exceed the greater of (1) the hourly rate equal to the
3minimum wage required by the applicable federal, State, or
4local minimum wage law or (2) $13.00 per hour.
5(Source: P.A. 99-860, eff. 1-1-17; 100-225, eff. 8-18-17.)
 
6    (820 ILCS 90/7 new)
7    Sec. 7. Legitimate business interest of the employer. In
8determining the legitimate business interest of the employer
9(consistent with the decision of the Supreme Court of Illinois
10in Reliable Fire Equipment Company v. Arredondo, 2011 IL
11111871), the totality of the facts and circumstances of the
12individual case shall be considered. Factors that may be
13considered in this analysis include, but are not limited to,
14the employee's exposure to the employer's customer
15relationships or other employees, the near-permanence of
16customer relationships, the employee's acquisition, use, or
17knowledge of confidential information through the employee's
18employment, the time restrictions, the place restrictions, and
19the scope of the activity restrictions. No factor carries any
20more weight than any other, but rather its importance will
21depend on the specific facts and circumstances of the
22individual case. Such factors are only nonconclusive aids in
23determining the employer's legitimate business interest, which
24in turn is but one component in the three-prong rule of reason,
25grounded in the totality of the circumstances. Each situation

 

 

HB3066- 5 -LRB102 10768 JLS 16098 b

1must be determined on its own particular facts. Reasonableness
2is gauged not just by some but by all of the circumstances. The
3same identical contract and restraint may be reasonable and
4valid under one set of circumstances and unreasonable and
5invalid under another set of circumstances.
 
6    (820 ILCS 90/10)
7    Sec. 10. Prohibiting covenants not to compete for low-wage
8employees.
9    (a) A covenant not to compete shall not be valid or
10enforceable unless the employee's actual or expected
11annualized rate of earnings exceeds $75,000 per year. This
12figure shall increase to $80,000 per year beginning on January
131, 2027, $85,000 per year beginning on January 1, 2032, and
14$90,000 per year beginning on January 1, 2037. No employer
15shall enter into a covenant not to compete with any low-wage
16employee of the employer.
17    (b) A covenant not to solicit shall not be valid or
18enforceable unless the employee's actual or expected
19annualized rate of earnings exceeds $45,000 per year. This
20figure shall increase to $47,500 per year beginning on January
211, 2027, $50,000 per year beginning on January 1, 2032, and
22$52,500 per year beginning on January 1, 2037. A covenant not
23to compete entered into between an employer and a low-wage
24employee is illegal and void.
25    (c) A covenant not to compete is void and illegal for any

 

 

HB3066- 6 -LRB102 10768 JLS 16098 b

1employee who an employer terminates or furloughs as the result
2of business circumstances or governmental orders related to
3the COVID-19 pandemic, or under circumstances that are similar
4to the COVID-19 pandemic, unless enforcement of the covenant
5not to compete includes compensation equivalent to the
6employee's base salary at the time of termination for the
7period of enforcement minus compensation earned through
8subsequent employment during the period of enforcement.
9(Source: P.A. 99-860, eff. 1-1-17.)
 
10    (820 ILCS 90/15 new)
11    Sec. 15. Enforceability of a covenant not to compete or a
12covenant not to solicit. A covenant not to compete or a
13covenant not to solicit is illegal and void unless (i) the
14employee receives adequate consideration, (ii) the covenant is
15ancillary to a valid employment relationship, (iii) the
16covenant is no greater than is required for the protection of a
17legitimate business interest of the employer, (iv) the
18covenant does not impose undue hardship on the employee, and
19(v) the covenant is not injurious to the public.
 
20    (820 ILCS 90/20 new)
21    Sec. 20. Ensuring employees are informed about their
22obligations. A covenant not to compete or a covenant not to
23solicit is illegal and void unless (i) the employer advises
24the employee in writing to consult with an attorney before

 

 

HB3066- 7 -LRB102 10768 JLS 16098 b

1entering into the covenant and (ii) the employer provides the
2employee with a copy of the covenant at least 14 calendar days
3before the commencement of the employee's employment or the
4employer provides the employee with at least 14 calendar days
5to review the covenant.
 
6    (820 ILCS 90/25 new)
7    Sec. 25. Remedies. In addition to any remedies available
8under any agreement between an employer and an employee or
9under any other statute, in a civil action filed by an employer
10(including, but not limited to, a complaint or counterclaim),
11if an employee prevails on a claim to enforce a covenant not to
12compete or a covenant not to solicit, the employee shall
13recover from the employer all costs and all reasonable
14attorney's fees regarding such claim to enforce a covenant not
15to compete or a covenant not to solicit.
 
16    (820 ILCS 90/30 new)
17    Sec. 30. Reformation.
18    (a) Extensive judicial reformation of a covenant not to
19compete or a covenant not to solicit may be against the public
20policy of this State and a court may refrain from wholly
21rewriting contracts.
22    (b) In some circumstances, a court may, in its discretion,
23choose to reform a covenant not to compete or a covenant not to
24solicit rather than hold such covenant unenforceable. Factors

 

 

HB3066- 8 -LRB102 10768 JLS 16098 b

1which may be considered when deciding whether such reformation
2is appropriate include the fairness of the restraints as
3originally written, whether the original restriction reflects
4a good-faith effort to protect a legitimate business interest
5of the employer, the extent of such reformation, and whether
6the parties included a clause authorizing such modifications
7in their agreement.