By: Matthew J. Hammer, Associate at Daley Mohan Groble P.C.
On August 19, 2016, Illinois Governor Bruce Rauner signed into law SB 3163, the Illinois Freedom to Work Act. The new law, effective January 1, 2017, will prohibit most private-sector Illinois employers from entering into covenants not to compete with their "low-wage" employees after that effective date.
The Act Applies to "Low-Wage" Employees Who Earn $13/Hour or Less. For Now…
The Illinois Freedom to Work Act defines "low-wage employee" as an employee who earns the greater of $13/hour or the applicable minimum wage. Accordingly, the law will apply to employees who earn $13/hour or less until the applicable federal, Illinois, or local minimum wage exceeds $13/hour – something minimum wage and workers' advocates have pushed for at ballot boxes in cities around the country and continue to push for during "Fight for $15" rallies and similar protests in Illinois.
The Act will only apply to employers that require their hourly employees to sign non-compete agreements and, for the time being, it will only apply to employers that pay their hourly employees $13/hour or less.
The Act Bars Non-Competition Agreements With Low-Wage Employees Signed After January 1, 2017, But Does Not Affect Those Signed Before That Date.
After January 1, 2017, the Act will prohibit Illinois employers from entering into agreements that restrict low-wage employees from performing:
- work for another employer for a specified period of time;
- work in a specified geographical area; or
- work for another employer that is similar to such low-wage employee's work for the employer included as a party to the agreement.
The Act will not affect non-competition agreements with low-wage employees entered into before January 1, 2017, however. The Act also does not address by its terms agreements designed to protect trade secrets and other confidential information.
What Should Employers Do?
By January 1, 2017, Illinois employers must end any policy or practice that requires low-wage employees to sign non-competes or other agreements that contain restrictions based on time, location, and the performance of "similar" work. However, employers likely will be able to continue to require low-wage employees to sign non-disclosure and confidentiality agreements after the Act's effective date.
Employers, those in and around Chicago and Cook County especially, should remain aware of local ordinances that can raise minimum wages and widen the Act's definition of "low-wage employee". Indeed, the City of Chicago will raise minimum wages for non-tipped employees to $11/hour starting July 1, 2017. Employers should also remain aware of how courts may expand the reach of this new law.
If you have questions about the Illinois Freedom to Work Act or other wage and hour issues, please contact the DMG attorney with whom you usually consult.
©2016 Daley Mohan Groble, P.C. This Update is provided for informational purposes only. It is not intended as legal advice nor does it create an attorney/client relationship between Daley Mohan Groble and any readers or recipients. Readers should consult counsel of their own choosing to discuss how these matters relate to their individual circumstances.