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Public Act 102-0358


 

Public Act 0358 102ND GENERAL ASSEMBLY

  
  
  

 


 
Public Act 102-0358
 
SB0672 EnrolledLRB102 10211 JLS 15534 b

    AN ACT concerning business.
 
    Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
 
    Section 5. The Illinois Freedom to Work Act is amended by
changing Sections 5 and 10 and by adding Sections 7, 15, 20,
25, 30, 35, and 97 as follows:
 
    (820 ILCS 90/5)
    Sec. 5. Definitions. In this Act:
    "Adequate consideration" means (1) the employee worked for
the employer for at least 2 years after the employee signed an
agreement containing a covenant not to compete or a covenant
not to solicit or (2) the employer otherwise provided
consideration adequate to support an agreement to not compete
or to not solicit, which consideration can consist of a period
of employment plus additional professional or financial
benefits or merely professional or financial benefits adequate
by themselves.
    "Covenant not to compete" means an agreement: (1) between
an employer and an a low-wage employee that is entered into
after the effective date of this amendatory Act of the 102nd
General Assembly that restricts the such low-wage employee
from performing:
            (1) (A) any work for another employer for a
        specified period of time;
            (2) (B) any work in a specified geographical area;
        or
            (3) (C) work for another employer that is similar
        to such low-wage employee's work for the employer
        included as a party to the agreement. ; and
        (2) that is entered into after the effective date of
    this Act.
    "Covenant not to compete" also means an agreement between
an employer and an employee, entered into after the effective
date of this amendatory Act of the 102nd General Assembly,
that by its terms imposes adverse financial consequences on
the former employee if the employee engages in competitive
activities after the termination of the employee's employment
with the employer.
    "Covenant not to compete" does not include (1) a covenant
not to solicit, (2) a confidentiality agreement or covenant,
(3) a covenant or agreement prohibiting use or disclosure of
trade secrets or inventions, (4) invention assignment
agreements or covenants, (5) a covenant or agreement entered
into by a person purchasing or selling the goodwill of a
business or otherwise acquiring or disposing of an ownership
interest, (6) clauses or an agreement between an employer and
an employee requiring advance notice of termination of
employment, during which notice period the employee remains
employed by the employer and receives compensation, or (7)
agreements by which the employee agrees not to reapply for
employment to the same employer after termination of the
employee.
    "Covenant not to solicit" means an agreement that is
entered into after the effective date of this amendatory Act
of the 102nd General Assembly between an employer and an
employee that (1) restricts the employee from soliciting for
employment the employer's employees or (2) restricts the
employee from soliciting, for the purpose of selling products
or services of any kind to, or from interfering with the
employer's relationships with, the employer's clients,
prospective clients, vendors, prospective vendors, suppliers,
prospective suppliers, or other business relationships.
    "Earnings" means the compensation, including earned
salary, earned bonuses, earned commissions, or any other form
of taxable compensation, reflected or that is expected to be
reflected as wages, tips, and other compensation on the
employee's IRS Form W-2 plus any elective deferrals not
reflected as wages, tips, and other compensation on the
employee's IRS Form W-2, such as, without limitation, employee
contributions to a 401(k) plan, a 403(b) plan, a flexible
spending account, or a health savings account, or commuter
benefit-related deductions.
    "Employee" means any individual permitted to work by an
employer in an occupation.
    "Employer" has the meaning given to such term in
subsection (c) of Section 3 of the Minimum Wage Law.
"Employer" does not include governmental or quasi-governmental
bodies.
    "Construction" means any constructing, altering,
reconstructing, repairing, rehabilitating, refinishing,
refurbishing, remodeling, remediating, renovating, custom
fabricating, maintenance, landscaping, improving, wrecking,
painting, decorating, demolishing, and adding to or
subtracting from any building, structure, highway, roadway,
street, bridge, alley, sewer, ditch, sewage disposal plant,
water works, parking facility, railroad, excavation or other
structure, project, development, real property or improvement,
or to do any part thereof, whether or not the performance of
the work herein described involves the addition to, or
fabrication into, any structure, project, development, real
property or improvement herein described of any material or
article of merchandise.
    "Low-wage employee" means an employee whose earnings do
not exceed the greater of (1) the hourly rate equal to the
minimum wage required by the applicable federal, State, or
local minimum wage law or (2) $13.00 per hour.
(Source: P.A. 99-860, eff. 1-1-17; 100-225, eff. 8-18-17.)
 
    (820 ILCS 90/7 new)
    Sec. 7. Legitimate business interest of the employer. In
determining the legitimate business interest of the employer,
the totality of the facts and circumstances of the individual
case shall be considered. Factors that may be considered in
this analysis include, but are not limited to, the employee's
exposure to the employer's customer relationships or other
employees, the near-permanence of customer relationships, the
employee's acquisition, use, or knowledge of confidential
information through the employee's employment, the time
restrictions, the place restrictions, and the scope of the
activity restrictions. No factor carries any more weight than
any other, but rather its importance will depend on the
specific facts and circumstances of the individual case. Such
factors are only non-conclusive aids in determining the
employer's legitimate business interest, which in turn is but
one component in the 3-prong rule of reason, grounded in the
totality of the circumstances. Each situation must be
determined on its own particular facts. Reasonableness is
gauged not just by some, but by all of the circumstances. The
same identical contract and restraint may be reasonable and
valid under one set of circumstances and unreasonable and
invalid under another set of circumstances.
 
    (820 ILCS 90/10)
    Sec. 10. Prohibiting covenants not to compete and
covenants not to solicit for low-wage employees.
    (a) No employer shall enter into a covenant not to compete
with any employee unless the employee's actual or expected
annualized rate of earnings exceeds $75,000 per year. This
amount shall increase to $80,000 per year beginning on January
1, 2027, $85,000 per year beginning on January 1, 2032, and
$90,000 per year beginning on January 1, 2037. A covenant not
to compete entered into in violation of this subsection is
void and unenforceable. No employer shall enter into a
covenant not to compete with any low-wage employee of the
employer.
    (b) No employer shall enter into a covenant not to solicit
with any employee unless the employee's actual or expected
annualized rate of earnings exceeds $45,000 per year. This
amount shall increase to $47,500 per year beginning on January
1, 2027, $50,000 per year beginning on January 1, 2032, and
$52,500 per year beginning on January 1, 2037. A covenant not
to solicit entered into in violation of this subsection is
void and unenforceable. A covenant not to compete entered into
between an employer and a low-wage employee is illegal and
void.
    (c) No employer shall enter into a covenant not to compete
or a covenant not to solicit with any employee who an employer
terminates or furloughs or lays off 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. A covenant not to
compete or a covenant not to solicit entered into in violation
of this subsection is void and unenforceable.
    (d) A covenant not to compete is void and illegal with
respect to individuals covered by a collective bargaining
agreement under the Illinois Public Labor Relations Act or the
Illinois Educational Labor Relations Act and individuals
employed in construction. This subsection (d) does not apply
to construction employees who primarily perform management,
engineering or architectural, design, or sales functions for
the employer or who are shareholders, partners, or owners in
any capacity of the employer.
(Source: P.A. 99-860, eff. 1-1-17.)
 
    (820 ILCS 90/15 new)
    Sec. 15. Enforceability of a covenant not to compete or a
covenant not to solicit. A covenant not to compete or a
covenant not to solicit is illegal and void unless (1) the
employee receives adequate consideration, (2) the covenant is
ancillary to a valid employment relationship, (3) the covenant
is no greater than is required for the protection of a
legitimate business interest of the employer, (4) the covenant
does not impose undue hardship on the employee, and (5) the
covenant is not injurious to the public.
 
    (820 ILCS 90/20 new)
    Sec. 20. Ensuring employees are informed about their
obligations. A covenant not to compete or a covenant not to
solicit is illegal and void unless (1) the employer advises
the employee in writing to consult with an attorney before
entering into the covenant and (2) the employer provides the
employee with a copy of the covenant at least 14 calendar days
before the commencement of the employee's employment or the
employer provides the employee with at least 14 calendar days
to review the covenant. An employer is in compliance with this
Section even if the employee voluntarily elects to sign the
covenant before the expiration of the 14-day period.
 
    (820 ILCS 90/25 new)
    Sec. 25. Remedies. In addition to any remedies available
under any agreement between an employer and an employee or
under any other statute, in a civil action or arbitration
filed by an employer (including, but not limited to, a
complaint or counterclaim), if an employee prevails on a claim
to enforce a covenant not to compete or a covenant not to
solicit, the employee shall recover from the employer all
costs and all reasonable attorney's fees regarding such claim
to enforce a covenant not to compete or a covenant not to
solicit, and the court or arbitrator may award appropriate
relief.
 
    (820 ILCS 90/30 new)
    Sec. 30. Attorney General enforcement.
    (a) Whenever the Attorney General has reasonable cause to
believe that any person or entity is engaged in a pattern and
practice prohibited by this Act, the Attorney General may
initiate or intervene in a civil action in the name of the
People of the State in any appropriate court to obtain
appropriate relief.
    (b) Before initiating an action, the Attorney General may
conduct an investigation and may: (1) require an individual or
entity to file a statement or report in writing under oath or
otherwise, as to all information the Attorney General may
consider necessary; (2) examine under oath any person alleged
to have participated in or with knowledge of the alleged
violation; or (3) issue subpoenas or conduct hearings in aid
of any investigation.
    (c) Service by the Attorney General of any notice
requiring a person or entity to file a statement or report, or
of a subpoena upon any person or entity, shall be made:
        (1) personally by delivery of a duly executed copy
    thereof to the person to be served or, if a person is not a
    natural person, in the manner provided in the Code of
    Civil Procedure when a complaint is filed; or
        (2) by mailing by certified mail a duly executed copy
    thereof to the person to be served at his or her last known
    abode or principal place of business within this State or,
    if a person is not a natural person, in the manner provided
    in the Code of Civil Procedure when a complaint is filed.
    The Attorney General may compel compliance with
investigative demands under this Section through an order by
any court of competent jurisdiction.
    (d)(1) In an action brought under this Act, the Attorney
General may obtain, as a remedy, monetary damages to the
State, restitution, and equitable relief, including any
permanent or preliminary injunction, temporary restraining
order, or other order, including an order enjoining the
defendant from engaging in a violation, or order any action as
may be appropriate. In addition, the Attorney General may
request and the court may impose a civil penalty not to exceed
$5,000 for each violation or $10,000 for each repeat violation
within a 5-year period. For purposes of this Section, each
violation of this Act for each person who was subject to an
agreement in violation of this Act shall constitute a separate
and distinct violation.
    (2) A civil penalty imposed under this subsection shall be
deposited into the Attorney General Court Ordered and
Voluntary Compliance Payment Projects Fund. Moneys in the Fund
shall be used, subject to appropriation, for the performance
of any function pertaining to the exercise of the duties of the
Attorney General, including, but not limited to, enforcement
of any law of this State and conducting public education
programs; however, any moneys in the Fund that are required by
the court or by an agreement to be used for a particular
purpose shall be used for that purpose.
 
    (820 ILCS 90/35 new)
    Sec. 35. Reformation.
    (a) Extensive judicial reformation of a covenant not to
compete or a covenant not to solicit may be against the public
policy of this State and a court may refrain from wholly
rewriting contracts.
    (b) In some circumstances, a court may, in its discretion,
choose to reform or sever provisions of a covenant not to
compete or a covenant not to solicit rather than hold such
covenant unenforceable. Factors which may be considered when
deciding whether such reformation is appropriate include the
fairness of the restraints as originally written, whether the
original restriction reflects a good-faith effort to protect a
legitimate business interest of the employer, the extent of
such reformation, and whether the parties included a clause
authorizing such modifications in their agreement.
 
    (820 ILCS 90/97 new)
    Sec. 97. Severability. The provisions of this Act are
severable under Section 1.31 of the Statute on Statutes.
 
    Section 99. Effective date. This Act takes effect January
1, 2022.

Effective Date: 1/1/2022