Illinois General Assembly - Full Text of HB0016
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Full Text of HB0016  97th General Assembly



State of Illinois
2011 and 2012


Introduced 1/12/2011, by Rep. Jil Tracy


New Act

    Creates the Illinois Covenants Not to Compete Act. Establishes criteria for enforceability of covenants not to compete. Creates certain rebuttable presumptions as to the enforceability of covenants not to compete. Establishes remedies and procedures for enforcing covenants not to compete. Effective January 1, 2012.

LRB097 00032 RLC 40035 b





HB0016LRB097 00032 RLC 40035 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 1. Short title. This Act may be cited as the
5Illinois Covenants Not to Compete Act.
6    Section 5. Definitions. As used in this Act, the following
7definitions apply:
8    (a) "Promisor" means a party against whom a covenant not to
9compete is sought to be enforced.
10    (b) "Promisee" means a party seeking to enforce a covenant
11not to compete.
12    (c) "Covenant not to compete" means a restriction which
13prevents a promisor from working for or providing personal
14services to a person or entity in competition with the
16    (d) "Key employee" or "key independent contractor" means
17any employee or independent contractor who: (i) has substantial
18involvement in the executive management of the promisee's
19business, (ii) has direct and substantial contact with
20customers of the promisee, (iii) has knowledge of bona fide
21trade secrets or other proprietary information of the promisee,
22(iv) has such unique skills that the person has achieved a high
23degree of public or industry notoriety, fame, or reputation as



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1a representative of the promisee, or (v) is among the highest
2paid 5% of the promisee's employees or independent contractors
3in the year preceding a separation from service by the key
4employee or key independent contractor.
5    (e) "Legitimate business interest" means: (i) customer
6relationships developed and maintained by the promisee, (ii)
7trade secrets or other proprietary information of the promisee
8to which a promisor was granted meaningful or regular access,
9or (iii) business goodwill of the promisee.
10    (f) "Trade secrets" means any trade secrets as defined in
11the Illinois Trade Secrets Act and the common law under such
13    Section 10. Criteria for enforceability of covenants not to
14compete. A covenant not to compete is void as an illegal
15restraint of trade and may not be enforced by a court in this
16State, unless:
17    (a) the promisee is a key employee or key independent
19    (b) the promisor either: (i) informs the key employee or
20key independent contractor in a written offer at least 2 weeks
21prior to the first day of the employment or contractor
22relationship that a covenant not to compete is required as a
23condition of employment or services, or (ii) enters into the
24covenant not to compete with the promisee upon: (A) a material
25advancement or promotion of the key employee or key independent



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1contractor, or (B) payment of a material bonus or material
2increase in rate of regular compensation; and
3    (c) the covenant not to compete is narrowly tailored to
4support the protection of a legitimate business interest of the
5promisee against actual or threatened infringement by the
7    Section 15. Rebuttable presumptions.
8    (a) A covenant not to compete will be presumed not to meet
9the criteria under subsection (c) of Section 10 if: (i) the
10duration of the covenant not to compete exceeds one year, (ii)
11the geographic area of the covenant not compete extends beyond
12any region in which the key employee or key independent
13contractor provided employment or contractor services for the
14promisee during the one year preceding termination of the
15employment or independent contractor relationship, or (iii)
16the type of personal services activity subject to the covenant
17not to compete extends beyond the nature of work the key
18employee or key independent contractor provided to the promisee
19during the one year preceding termination of the employment or
20independent contractor relationship.
21    (b) A promisee may introduce evidence to rebut the
22presumptions in subsection (a) of this Section upon a showing
23that more extensive restrictions are necessary to protect a
24legitimate business interest.



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1    Section 20. Remedies and procedures in actions to enforce
2covenants not to compete.
3    (a) Modification. For any action brought to enforce a
4covenant not to compete in which the covenant is found not to
5meet the criteria in subsection (c) of Section 10, the court
6retains discretion to modify the covenant not to compete to the
7extent necessary to make the restraint reasonable under the
8circumstances. If the court so modifies the covenant, the court
9may not award the promisee any damages for a breach of the
10covenant not to compete occurring before an order of
12    (b) Attorney's Fees and Costs of Litigation. For any action
13brought to enforce a covenant not to compete in which the
14subject agreement contains a provision granting the promisee a
15right to recover attorney's fees or other costs of litigation
16from the promisor, such provision shall be construed to provide
17the promisor with a mutual entitlement to attorney's fees or
18other costs of litigation should it be the prevailing party
19against the promisee.
20    (c) Declaratory Judgment. Any promisor has the right to
21file an action under Section 2-701 of the Code of Civil
22Procedure for a declaration of his or her rights under a
23covenant not to compete, and in the event the promisor is the
24prevailing party in such a proceeding, the court may award him
25or her reasonable attorney's fees and court costs.



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1    Section 25. Exceptions. This Act does not apply to and
2shall not modify the common law with respect to:
3    (a) any agreement relating to the solicitation, hiring, or
4contact with employees, vendors, or customers;
5    (b) any confidentiality agreement;
6    (c) any agreement between: (i) a corporation, partnership,
7limited liability partnership, or limited liability company,
8and (ii) its shareholders, partners, or members; and
9    (d) an agreement between an employer and employee under
10which an employee receives incentive compensation of any kind,
11and where the employer is entitled to forfeiture of such
12compensation for competition.
13    Section 99. Effective date. This Act takes effect January
141, 2012.