Illinois General Assembly - Full Text of SB0672
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Full Text of SB0672  102nd General Assembly

SB0672enr 102ND GENERAL ASSEMBLY

  
  
  

 


 
SB0672 EnrolledLRB102 10211 JLS 15534 b

1    AN ACT concerning business.
 
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 7, 15, 20,
625, 30, 35, and 97 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 consideration can consist of a period
15of employment plus additional professional or financial
16benefits or merely professional or financial benefits adequate
17by themselves.
18    "Covenant not to compete" means an agreement: (1) between
19an employer and an a low-wage employee that is entered into
20after the effective date of this amendatory Act of the 102nd
21General Assembly that restricts the such low-wage employee
22from performing:
23            (1) (A) any work for another employer for a

 

 

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

 

 

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1agreements by which the employee agrees not to reapply for
2employment to the same employer after termination of the
3employee.
4    "Covenant not to solicit" means an agreement that is
5entered into after the effective date of this amendatory Act
6of the 102nd General Assembly between an employer and an
7employee that (1) restricts the employee from soliciting for
8employment the employer's employees or (2) restricts the
9employee from soliciting, for the purpose of selling products
10or services of any kind to, or from interfering with the
11employer's relationships with, the employer's clients,
12prospective clients, vendors, prospective vendors, suppliers,
13prospective suppliers, or other business relationships.
14    "Earnings" means the compensation, including earned
15salary, earned bonuses, earned commissions, or any other form
16of taxable compensation, reflected or that is expected to be
17reflected as wages, tips, and other compensation on the
18employee's IRS Form W-2 plus any elective deferrals not
19reflected as wages, tips, and other compensation on the
20employee's IRS Form W-2, such as, without limitation, employee
21contributions to a 401(k) plan, a 403(b) plan, a flexible
22spending account, or a health savings account, or commuter
23benefit-related deductions.
24    "Employee" means any individual permitted to work by an
25employer in an occupation.
26    "Employer" has the meaning given to such term in

 

 

SB0672 Enrolled- 4 -LRB102 10211 JLS 15534 b

1subsection (c) of Section 3 of the Minimum Wage Law.
2"Employer" does not include governmental or quasi-governmental
3bodies.
4    "Construction" means any constructing, altering,
5reconstructing, repairing, rehabilitating, refinishing,
6refurbishing, remodeling, remediating, renovating, custom
7fabricating, maintenance, landscaping, improving, wrecking,
8painting, decorating, demolishing, and adding to or
9subtracting from any building, structure, highway, roadway,
10street, bridge, alley, sewer, ditch, sewage disposal plant,
11water works, parking facility, railroad, excavation or other
12structure, project, development, real property or improvement,
13or to do any part thereof, whether or not the performance of
14the work herein described involves the addition to, or
15fabrication into, any structure, project, development, real
16property or improvement herein described of any material or
17article of merchandise.
18    "Low-wage employee" means an employee whose earnings do
19not exceed the greater of (1) the hourly rate equal to the
20minimum wage required by the applicable federal, State, or
21local minimum wage law or (2) $13.00 per hour.
22(Source: P.A. 99-860, eff. 1-1-17; 100-225, eff. 8-18-17.)
 
23    (820 ILCS 90/7 new)
24    Sec. 7. Legitimate business interest of the employer. In
25determining the legitimate business interest of the employer,

 

 

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1the totality of the facts and circumstances of the individual
2case shall be considered. Factors that may be considered in
3this analysis include, but are not limited to, the employee's
4exposure to the employer's customer relationships or other
5employees, the near-permanence of customer relationships, the
6employee's acquisition, use, or knowledge of confidential
7information through the employee's employment, the time
8restrictions, the place restrictions, and the scope of the
9activity restrictions. No factor carries any more weight than
10any other, but rather its importance will depend on the
11specific facts and circumstances of the individual case. Such
12factors are only non-conclusive aids in determining the
13employer's legitimate business interest, which in turn is but
14one component in the 3-prong rule of reason, grounded in the
15totality of the circumstances. Each situation must be
16determined on its own particular facts. Reasonableness is
17gauged not just by some, but by all of the circumstances. The
18same identical contract and restraint may be reasonable and
19valid under one set of circumstances and unreasonable and
20invalid under another set of circumstances.
 
21    (820 ILCS 90/10)
22    Sec. 10. Prohibiting covenants not to compete and
23covenants not to solicit for low-wage employees.
24    (a) No employer shall enter into a covenant not to compete
25with any employee unless the employee's actual or expected

 

 

SB0672 Enrolled- 6 -LRB102 10211 JLS 15534 b

1annualized rate of earnings exceeds $75,000 per year. This
2amount shall increase to $80,000 per year beginning on January
31, 2027, $85,000 per year beginning on January 1, 2032, and
4$90,000 per year beginning on January 1, 2037. A covenant not
5to compete entered into in violation of this subsection is
6void and unenforceable. No employer shall enter into a
7covenant not to compete with any low-wage employee of the
8employer.
9    (b) No employer shall enter into a covenant not to solicit
10with any employee unless the employee's actual or expected
11annualized rate of earnings exceeds $45,000 per year. This
12amount shall increase to $47,500 per year beginning on January
131, 2027, $50,000 per year beginning on January 1, 2032, and
14$52,500 per year beginning on January 1, 2037. A covenant not
15to solicit entered into in violation of this subsection is
16void and unenforceable. A covenant not to compete entered into
17between an employer and a low-wage employee is illegal and
18void.
19    (c) No employer shall enter into a covenant not to compete
20or a covenant not to solicit with any employee who an employer
21terminates or furloughs or lays off as the result of business
22circumstances or governmental orders related to the COVID-19
23pandemic or under circumstances that are similar to the
24COVID-19 pandemic, unless enforcement of the covenant not to
25compete includes compensation equivalent to the employee's
26base salary at the time of termination for the period of

 

 

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1enforcement minus compensation earned through subsequent
2employment during the period of enforcement. A covenant not to
3compete or a covenant not to solicit entered into in violation
4of this subsection is void and unenforceable.
5    (d) A covenant not to compete is void and illegal with
6respect to individuals covered by a collective bargaining
7agreement under the Illinois Public Labor Relations Act or the
8Illinois Educational Labor Relations Act and individuals
9employed in construction. This subsection (d) does not apply
10to construction employees who primarily perform management,
11engineering or architectural, design, or sales functions for
12the employer or who are shareholders, partners, or owners in
13any capacity of the employer.
14(Source: P.A. 99-860, eff. 1-1-17.)
 
15    (820 ILCS 90/15 new)
16    Sec. 15. Enforceability of a covenant not to compete or a
17covenant not to solicit. A covenant not to compete or a
18covenant not to solicit is illegal and void unless (1) the
19employee receives adequate consideration, (2) the covenant is
20ancillary to a valid employment relationship, (3) the covenant
21is no greater than is required for the protection of a
22legitimate business interest of the employer, (4) the covenant
23does not impose undue hardship on the employee, and (5) the
24covenant is not injurious to the public.
 

 

 

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1    (820 ILCS 90/20 new)
2    Sec. 20. Ensuring employees are informed about their
3obligations. A covenant not to compete or a covenant not to
4solicit is illegal and void unless (1) the employer advises
5the employee in writing to consult with an attorney before
6entering into the covenant and (2) the employer provides the
7employee with a copy of the covenant at least 14 calendar days
8before the commencement of the employee's employment or the
9employer provides the employee with at least 14 calendar days
10to review the covenant. An employer is in compliance with this
11Section even if the employee voluntarily elects to sign the
12covenant before the expiration of the 14-day period.
 
13    (820 ILCS 90/25 new)
14    Sec. 25. Remedies. In addition to any remedies available
15under any agreement between an employer and an employee or
16under any other statute, in a civil action or arbitration
17filed by an employer (including, but not limited to, a
18complaint or counterclaim), if an employee prevails on a claim
19to enforce a covenant not to compete or a covenant not to
20solicit, the employee shall recover from the employer all
21costs and all reasonable attorney's fees regarding such claim
22to enforce a covenant not to compete or a covenant not to
23solicit, and the court or arbitrator may award appropriate
24relief.
 

 

 

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1    (820 ILCS 90/30 new)
2    Sec. 30. Attorney General enforcement.
3    (a) Whenever the Attorney General has reasonable cause to
4believe that any person or entity is engaged in a pattern and
5practice prohibited by this Act, the Attorney General may
6initiate or intervene in a civil action in the name of the
7People of the State in any appropriate court to obtain
8appropriate relief.
9    (b) Before initiating an action, the Attorney General may
10conduct an investigation and may: (1) require an individual or
11entity to file a statement or report in writing under oath or
12otherwise, as to all information the Attorney General may
13consider necessary; (2) examine under oath any person alleged
14to have participated in or with knowledge of the alleged
15violation; or (3) issue subpoenas or conduct hearings in aid
16of any investigation.
17    (c) Service by the Attorney General of any notice
18requiring a person or entity to file a statement or report, or
19of a subpoena upon any person or entity, shall be made:
20        (1) personally by delivery of a duly executed copy
21    thereof to the person to be served or, if a person is not a
22    natural person, in the manner provided in the Code of
23    Civil Procedure when a complaint is filed; or
24        (2) by mailing by certified mail a duly executed copy
25    thereof to the person to be served at his or her last known
26    abode or principal place of business within this State or,

 

 

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1    if a person is not a natural person, in the manner provided
2    in the Code of Civil Procedure when a complaint is filed.
3    The Attorney General may compel compliance with
4investigative demands under this Section through an order by
5any court of competent jurisdiction.
6    (d)(1) In an action brought under this Act, the Attorney
7General may obtain, as a remedy, monetary damages to the
8State, restitution, and equitable relief, including any
9permanent or preliminary injunction, temporary restraining
10order, or other order, including an order enjoining the
11defendant from engaging in a violation, or order any action as
12may be appropriate. In addition, the Attorney General may
13request and the court may impose a civil penalty not to exceed
14$5,000 for each violation or $10,000 for each repeat violation
15within a 5-year period. For purposes of this Section, each
16violation of this Act for each person who was subject to an
17agreement in violation of this Act shall constitute a separate
18and distinct violation.
19    (2) A civil penalty imposed under this subsection shall be
20deposited into the Attorney General Court Ordered and
21Voluntary Compliance Payment Projects Fund. Moneys in the Fund
22shall be used, subject to appropriation, for the performance
23of any function pertaining to the exercise of the duties of the
24Attorney General, including, but not limited to, enforcement
25of any law of this State and conducting public education
26programs; however, any moneys in the Fund that are required by

 

 

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1the court or by an agreement to be used for a particular
2purpose shall be used for that purpose.
 
3    (820 ILCS 90/35 new)
4    Sec. 35. Reformation.
5    (a) Extensive judicial reformation of a covenant not to
6compete or a covenant not to solicit may be against the public
7policy of this State and a court may refrain from wholly
8rewriting contracts.
9    (b) In some circumstances, a court may, in its discretion,
10choose to reform or sever provisions of a covenant not to
11compete or a covenant not to solicit rather than hold such
12covenant unenforceable. Factors which may be considered when
13deciding whether such reformation is appropriate include the
14fairness of the restraints as originally written, whether the
15original restriction reflects a good-faith effort to protect a
16legitimate business interest of the employer, the extent of
17such reformation, and whether the parties included a clause
18authorizing such modifications in their agreement.
 
19    (820 ILCS 90/97 new)
20    Sec. 97. Severability. The provisions of this Act are
21severable under Section 1.31 of the Statute on Statutes.
 
22    Section 99. Effective date. This Act takes effect January
231, 2022.