What Restrictive Covenants Are Enforceable for Illinois Businesses?
A restrictive covenant is a business agreement between employers and their employees that limits their right and ability to compete against their employer after they are let go or move on. In January 2022, Illinois law relating to restrictive covenants became more limiting, granting employees more rights than they previously had in business contract negotiations. The enforceability of restrictive covenants in Illinois is now based on an employee’s salary. And even if the salary requirements are met, the restrictive covenant contract still needs to be considered ‘reasonable’ in order to be enforced.
Many businesses find their restrictive covenants are not actually enforceable long after the ink has dried because the original contracts were not correctly worded or constructed. Suppose you want to sign an employee to a restrictive covenant contract agreement. In that case, it is highly recommended that you work with experienced business law attorneys to help you draft the contract.
The restrictive covenants that are enforceable in Illinois include the following:
- Anti-raiding agreements.
- Non-compete agreements.
- Non-solicitation agreements.
- Nondisclosure agreements.
Our law firm has years of experience representing clients across Illinois with their business law legal concerns. We can help draft business contracts for your company and ensure that they stand a better chance of remaining enforceable for years to come. To learn more about our legal services, please contact our Deerfield-based law offices to schedule your initial consultation.
What is a Non-Compete Agreement?
A non-compete agreement allows businesses to protect trade secrets, business practices, training programs, and other valuable information from finding its way into the hands of the competition. The business contract accomplishes this by restricting an employee from working for a direct competitor for a certain period of time after the business relationship with your company has concluded.
When your business spends enough time training a worker and even trusts them with trade secrets, it stands to reason that the business would not want that worker to take that business knowledge to the competitors. Sometimes, a company’s secrets are the things that set them apart from the competition. Trademarked formulas, business plans, and client information are tightly guarded secrets that, if they reach the competition or the general public, could potentially sink a company.
Every state has different laws in place that govern the validity and enforcement of non-compete agreements. Illinois’ laws were recently changed to limit the power and reach of non-compete agreements. As of 2022, there are new minimum salary requirements for non-competes and non-solicits in Illinois, thanks to the Freedom to Work Act.
In Illinois, a non-compete clause is only enforceable if the employee earns more than $75,000 annually. If they make less than that, the non-compete is invalid and unenforceable. The salary threshold will increase in 2027 to account for inflation and then every five years after that.
What is a Non-Solicitation Agreement?
A non-solicitation agreement is an employment agreement that helps protect a company or corporation from losing valued employees and customers. These business contracts are beneficial when a former employee leaves to work with a new business or decides to start their own company. There is sometimes a fear that the former employee will attempt to poach talent from your employee roster or steal away longtime customers. With a non-solicit clause, the former employee is restricted from carrying out such actions.
Like a non-compete clause, there are new minimum salary requirements for non-solicitation clauses in Illinois. A non-solicit agreement is automatically invalid and unenforceable if the employee who signed the contract makes less than $45,000 a year. Again, this number will increase over the years to adjust for inflation. In 2027, the threshold will increase to $47,500.
What is the Right Restrictive Covenant for You and Your Business?
There are many similarities between non-competes and non-solicits. Both or either may be valuable contract agreements to include when negotiating with employees or prospective new workers.
Generally, a non-solicitation clause is weaker and less restrictive than a non-compete clause. While it prevents poaching, non-solicitation agreements still allow former employees to find work in the same industry, potentially bringing their skills and knowledge to a direct competitor of your business.
Non-compete clauses can be more challenging to enforce, though, and the courts usually have a more favorable opinion of non-solicitation agreements. The reason for this is that non-competes can restrict skilled workers from finding new employment.
Whatever type of employment contract you choose to write, it is crucial that you work with lawyers experienced in Illinois business law. Restrictive covenants can be difficult to enforce, so you want to ensure that the terms are reasonable, the language is understandable, and the minimum requirements are met.
Contact Us to Schedule Your Case Evaluation
It is important to understand the difference between the many different types of restrictive covenants in employment contracts. Some have benefits that others do not, but all can be challenging to enforce if a former employee elects to bring the matter to court. To increase the chances of your employment documents standing up in court, it is absolutely vital that you work with a lawyer experienced in handling cases similar to yours.
The S.T. Legal Group has served businesses and business owners across Illinois for years. Our extensive experience can make us a valuable resource for you and your business needs. We take pride in providing knowledgeable, honest, and cost-effective legal representation.
To discuss your case in more detail with a member of our legal team, please call our law offices at 847.654.9200.