Illinois Noncompete Agreement: What's Included and Enforceability

Is a Non-Compete Agreement Enforceable in Illinois?

Yes. In Illinois, non-compete agreements are generally enforceable. On January 1, 2022, Illinois enacted the Illinois Freedom to Work Act which modified the laws governing non-compete agreements. Under the new act, non-compete agreements are enforceable if the contract meets the following conditions:

• The employee entering the agreement must earn at least $75,000 annually.
• The employee must be employed for at least two years or have received professional or financial benefits.
• The non-compete agreement must protect an employer’s legitimate business interest.
• The contract must be deemed reasonable using the “Three-Component Test” created by the Illinois Supreme Court.
• Employees must be given fourteen days to review the non-compete agreement before signing the contract.
• Employers must advise employees in writing to consult an attorney before entering the agreement.

Proving that the non-compete agreement is reasonable is vital to ensuring that the contract is enforceable. The Illinois Supreme Court developed the “Three-Component Test" to determine the reasonability of a non-compete agreement. The three components are:

1. Legitimate business The restrictions in the non-compete agreement protect a legitimate business interest like a trade secret or customer lists.
2. Public hardship. The non-compete agreement cannot impose a hardship on the employee or the public.
3. Reasonable restraint. The extent of the restrictions, like duration or geographic area, are reasonable.

Is the New Illinois Non-Compete Law Retroactive?

No. The amendments made to the Illinois Freedom to Work Act which went into effect on January 1, 2022 are not retroactive. Any non-compete agreements that were entered into prior to this date will not be effected by the amendment.

How Long Does an Illinois Non-Compete Agreement Last?

The new non-compete laws do not lay out a maximum term for the duration of the agreement. Based on previous court cases and non-compete agreements that Illinois courts have ruled reasonable, non-compete agreements can last up to five years.

Whether the duration of a non-compete agreement is deemed reasonable by the court depends heavily on the specific facts of the case. Factors that can effect whether a timeframe is reasonable include the type of work, the geographic area, the specialized training of the employee, and the business interest that is protected by the contract.

How Do You Get Around a Non-Compete Agreement in Illinois?

To get around a non-compete agreement in Illinois, the employee must show that the agreement does not adhere to the provisions in the amended Illinois Freedom to Work Act.

One way to do this, is to prove that the non-compete does not protect a legitimate business interest. Legitimate business interests are usually trade secrets, client lists, or other confidential business information that the employer takes precautions to keep confidential. The employer cannot use a non-compete to merely restrict competition in their industry.

What Voids an Illinois Non-Compete Agreement?

In Illinois, all contracts, including non-compete agreements, must adhere to state contract laws. In order for a contract to be legally binding and enforceable, it must contain an offer, acceptance, and consideration. Without any one of these elements, the contract will be void.

Consideration is the main component of a contract and it is the exchange of something of value between the parties. For non-compete agreements, many states consider ongoing employment adequate consideration for signing a non-compete. Illinois however requires more sufficient consideration.

Many Illinois courts will require that an employee is promised at least two years of tenure or additional financial consideration like a raise or a bonus to satisfy the condition of adequate consideration. Without this additional consideration, a court can deem an Illinois non-compete agreement void.