Illinois recently became one of the first states to ban non-compete agreements for low wage workers when it passed the Illinois Freedom to Work Act. The law, which takes effect on January 1, 2017 and applies to agreements signed after that date, bars non-compete agreements for workers who earn the greater of 1) the Federal, State, or local minimum wage or 2) $13.00 an hour. At present, because the State minimum wage is below $13.00 per hour, $13.00 an hour is the operative figure in Illinois.
While Illinois is one of the first states to enact this type of blanket ban on non-competes based on the employee’s salary status, in other states, including New Jersey and Maryland, legislation based on eligibility for unemployment compensation has been proposed. Moreover, as we have previously blogged, the New York Attorney General has sought to prohibit companies from agreeing to non-competes with low wage workers. The White House has also weighed in on the issue of non-compete agreements for low wage workers, questioning whether they protect legitimate business interests or instead merely hamper labor mobility.
In sum, the political winds are clearly blowing against non-compete agreements for low-wage workers. Employers should be wary of attempting to secure stability in their low wage workforce through non-compete agreements and employers in Illinois should review and, if necessary, revise their employment agreements in light of this new law.