An Illinois Non-Compete Agreement is a legally binding contract that aims to protect a business’s interests by preventing employees from working for competitors after leaving their current position.
While non-compete agreements are generally permissible in Illinois, their enforceability can vary. It’s important to ensure that the agreement conforms to the regulations and standards of the state where the employee resides.
Additionally, the courts in Illinois typically prefer non-compete agreements that have a narrow scope and aren’t overly restrictive, allowing employees the opportunity to pursue their careers.
Legally Enforceable in Illinois?
Non-compete agreements in Illinois are legally enforceable, but there are limits on what can be enforced. Below are the instances in which a non-compete is and is not allowed.
What’s Protected?
Illinois protections for non-compete agreements depend on when the agreement is reached.
For agreements pre-January 1, 2022: Legitimate business interests are based on the totality of the facts and circumstances of the case. The following are factors:
- Trade secrets
- Confidential information
- Near permanent business relationships
For agreements entered on or after January 1, 2022, the following are factors:
- 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.
Reasonable Use and Exceptions
Illinois reasonable use also depends on the date of the agreement:
For agreements pre-January 1, 2022: No greater than required to protect a legitimate business interest; does not impose an undue hardship on the employee; not harmful to the public; and reasonable in time, space, and scope. [It may require two years of employment before any non-compete can be enforced.]
For agreements entered on or after January 1, 2022: Non-competes are illegal and void unless (as per 820 ILCS 90);
- the employee receives adequate consideration
- the covenant is ancillary to a valid employment relationship
- the covenant is no greater than is required for the protection of a legitimate business interest of the employer
- the covenant does not impose an undue hardship on the employee, and
- the covenant is not injurious to the public,” and the employee
- is advised, “in writing to consult with an attorney”
and - provided with the covenant at least 14 calendar days’ notice (though the notice is waivable).
- is advised, “in writing to consult with an attorney”
Adequate consideration is defined as:
- the employee worked for the employer for at least two years after the employee signed an agreement containing a covenant not to compete
or
- The employer otherwise provided consideration adequate to support an agreement not to compete…which review can consist of the period of employment plus additional professional or financial benefits or merely professional or financial benefits adequate by themselves.
Exceptions
- Broadcasters
- Government contractors
- Physicians
- Low-wage workers
- Certain nurses and certified nurse aides.
- For agreements entered on or after January 1, 2022: The “low-wage” exemption changes to a wage threshold (all earnings from the employer) of $75,000 (increasing to $80,000 by 2027, $85,000 by 2032, and $90,000 by 2037); individuals covered by collective bargaining agreements under the 5 ILCS 315 or the 115 ILCS 5 or employed in construction with exceptions.
Time Limitations
Illinois law does not state a specific allowable duration for a non-compete agreement. However, Illinois courts have generally found that agreements that are shorter in duration are preferable. If your agreement is longer than two years, it could be ruled unenforceable if challenged.
Geographic Limitations
Again, Illinois law does not specifically state geographic limitation rules on non-compete agreements. However, Illinois courts have ruled that broad contracts with significant geographic limitations are not enforceable.
Blue Penciling (Reformation)
Rather than hold the entire non-compete agreement enforceable, a court may reform or sever provisions of a covenant not to compete instead. Several factors, such as the fairness of the restraints, determine these decisions as per 820 ILCS 90/35.
Sample
Below, you can download a free Illinois non-compete agreement template in PDF and Word format:
