Illinois Non-Compete Agreement Template

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Illinois Non-Compete Agreement Template

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Last updated October 26th, 2022

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An Illinois non-compete agreement limits the signing party’s capacity to work for a competitor in the same industry as their employer. Non-competes are only enforced by the courts if the restrictive language is reasonable and the limitations necessary to prevent unfair competition against the employer. This contract is also frequently used in the sale of a company to ensure that the previous owner does not solicit their former clients, disclose trade secrets, or otherwise compete with the business.

Contents

Enforceability in Illinois

Non-compete agreements are enforceable contracts in Illinois. State statutes specify numerous requirements that must be satisfied for a non-compete to be valid, as well as situations where non-competes cannot be employed.[1][2]

When it IS Enforceable

The statutes regulating non-competes state that an agreement will be invalid unless the arrangement:

  • Involves sufficient consideration;
  • Is ancillary to a valid employment contract.
  • Is limited to protecting a legitimate business interest only;
  • Does not cause undue hardship to the restricted party; and
  • Is not harmful to the public.[3]

A copy of the non-compete must be given from the employer to the employee fourteen (14) days before they begin work or before the agreement’s execution. The employee must also receive a written notice stating that they have the right to consult with a lawyer before signing the agreement.[1]

When it’s NOT Enforceable

  • Low-salary employees. It is prohibited to enforce a non-compete against an employee earning $75,000 a year or less.[4]
  • COVID-19. Employees who lost their jobs due to the COVID-19 pandemic cannot be restricted by a non-compete.[5]
  • Public Labor Relations Act/Educational Labor Relations Act. A non-compete agreement cannot be enforced against individuals who are parties to collective bargaining agreements under the Public Labor Relations Act or Educational Labor Relations Act.[6]
  • Construction workers. Non-competes are unenforceable for construction workers (except those mainly involved in management, engineering, architecture, design, and sales or who are shareholders, partners, or owners).[6]
  • Broadcasters. A restrictive covenant cannot be placed on broadcast industry employees.[7]
  • Lawyers. A restriction on a lawyer’s ability to practice law is unenforceable. An exception applies to agreements concerning a lawyer’s retirement benefits.[8]

Maximum Time Period

State statutes do not impose a specific maximum time period for non-competes, and courts will consider whether the restriction’s duration is necessary for the employer’s protection on a case-by-case basis.[9] In the past, Illinois courts have upheld non-competes with durations of two (2) and five (5) years.[10][11]

Geographical Area

As with the other restrictions in a non-compete agreement, the area covered by the agreement cannot go beyond what is required to protect the employer’s business interests.[12] Courts will compare the agreement’s geographic scope to the area where the employer operates their business when assessing whether a geographic restriction is enforceable.[13]

Consideration

Illinois state law indicates that adequate consideration is at least two (2) years of employment after a non-compete is signed or work-related/monetary benefits (which can be provided in addition to employment or on its own).[14] In one case, consideration was defined as:

“Any act or promise that benefits one party or disadvantages the other is sufficient consideration to support the formation of a contract.“[15]

The Illinois Court of Appeals has stated that two (2) years of employment is the minimum for the contract to be enforceable.[16] By contrast, federal district court judges disagreed with this minimum requirement and have allowed shorter periods of employment as sufficient consideration.[17][18][19]

Sources

  1. 820 ILCS 90/15
  2. 820 ILCS 90/ Illinois Freedom to Work Act
  3. 820 ILCS 90/20
  4. 820 ILCS 90/10(a)
  5. 820 ILCS 90/10(c)
  6. 820 ILCS 90/10(d)
  7. 820 ILCS 17/10(a)
  8. IL R S CT RPC Rule 5.6
  9. 820 ILCS 90/7
  10. Millard Maint. Serv. Co. v. Bernero, 207 Ill. App. 3d 736, 749-50, 566 N.E.2d 379, 387-88 (1990)
  11. Mohanty v. St. John Heart Clinic, S.C., 225 Ill. 2d 52, 77-78, 866 N.E.2d 85, 99-100 (2006)
  12. AssuredPartners, Inc. v. Schmitt, 2015 IL App (1st) 141863, ¶35-36, 44 N.E.3d 463, 472-73 (2015)
  13. Cambridge Eng’g, Inc. v. Mercury Partners 90 BI, Inc., 378 Ill. App. 3d 437, 448, 879 N.E.2d 512, 522-23 (2007)
  14. 820 ILCS 90/5
  15. Bires v. Waltom, LLC, 662 F. Supp. 2d 1019, 1028 (N.D. Ill. 2009)
  16. Fifield v. Premier Dealer Servs., Inc., 2013 IL App (1st) 120327, ¶19, 993 N.E.2d 938, 943-44 (2013)
  17. Montel Aetnastak, Inc. v. Miessen, 998 F. Supp. 2d 694, 716 (N.D. Ill. 2014)
  18. Cumulus Radio Corp. v. Olson, 80 F. Supp. 3d 900, 909 (C.D. Ill. 2015)
  19. Stericycle, Inc. v. Simota, No. 16 C 4782, 2017 WL 4742197, at *5 (N.D. Ill. Oct. 20, 2017)
  20. Arpac Corp. v. Murray, 226 Ill. App. 3d 65, 79-80, 589 N.E.2d 640, 651-52 (1992)
  21. 820 ILCS 90/35

Related Forms (2)

Illinois Non-Disclosure Agreement – A legal document that prohibits a recipient of confidential information from sharing it with unauthorized parties.

Download: PDF, Word (.docx), OpenDocument

 

Illinois Non-Solicitation Agreement – Limits an employee from contacting certain parties (e.g., customers, clients, co-workers) after they’ve departed from the company.

Download: PDF, Word (.docx), OpenDocument