On August 13, 2021, the State of Illinois enacted a law, amending the Illinois Freedom To Work Act (the Law) to limit the enforceability of non-competition and non-solicitation agreements between employers and employees in Illinois. The restrictions apply to contracts entered into on or after January 1, 2022.
Among the restrictions contained in the Law are:
The Law further makes a covenant not to compete, or a covenant not to solicit, void and illegal, unless:
As a condition to the legality and enforceability of a covenant not to compete and a covenant not to solicit the employer must:
The Law further provides, as an additional remedy available under any agreement between an employer and an employee or under any statute, in a civil action or arbitration filed by an employer (including a complaint or a counterclaim) that if an employee prevails on a claim to enforce a covenant not to compete or covenant not to solicit, the employee shall recover from the employer all costs and all reasonable attorneys’ fees regarding such claim. The Law specifies that the Illinois Attorney General has the authority to initiate or intervene if the Attorney General believes the employer is engaged in a pattern or practice prohibited by the Law, and grants the Attorney General investigative authority and the right to impose remedies and sanctions for those found in violation.
The Law authorizes a court to use its discretion to reform or sever provisions of a covenant not to compete or not to solicit, and provide factors the court may choose to consider in exercising that discretion.
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The new Illinois Law follows on President Biden’s Executive Order Promoting Competition in the America Economy from July 9, 2021 in which President Biden encouraged the FTC to ban or limit non-compete agreements.
All health care entities and others using non-competition or non-solicitation agreements in Illinois should be aware of the Law and plan now to make appropriate decisions in light of it.
Foley is here to help you address the short- and long-term impacts in the wake of regulatory changes. We have the resources to help you navigate these and other important legal considerations related to business operations and industry-specific issues. Please reach out to the authors, your Foley relationship partner, or to our Health Care Practice Group with any questions.