What’s scarier than Halloween? For Illinois employers, it could be that they now have only approximately two months to prepare for Illinois’ new limits on employee restrictive covenants. On August 13, 2021, Illinois Governor Pritzker signed Senate Bill (SB) 672 (now Public Act 102-0358) into law, imposing new conditions on employers’ use of noncompete agreements and nonsolicitation agreements in Illinois. The law goes into effect on January 1, 2022, with Illinois joining the tide of states (as well as the federal government–see our blog on President Biden’s recent Executive Order addressing restrictive covenants here) cracking down on employers’ use of restrictive covenants.
Here’s what Illinois employers need to know now.
Employers have a couple of months to prepare–and don’t need to look back at prior agreements
The Act is effective for any contract entered into after January 1, 2022, and does not apply retroactively. Therefore, employers will not be required to inventory and assess agreements signed prior to the Act’s effective date.
Noncompete agreements banned for employees making $75,000 per year or less
The Act does not ban noncompetes for all Illinois employees, but instead for those making $75,000 per year in earnings or less. This salary threshold will increase by $5,000 every five years until it reaches $90,000 in 2037.
“Earnings” includes what employers might expect: earned salary, earned bonuses, earned commissions, or any other form of compensation reported on an employee’s IRS Form W-2.