97TH GENERAL ASSEMBLY
State of Illinois
2011 and 2012
HB4976

 

Introduced 2/3/2012, by Rep. Rosemary Mulligan

 

SYNOPSIS AS INTRODUCED:
 
New Act

    Creates the Illinois Covenants Not to Compete Act. Establishes criteria for enforceability of covenants not to compete. Creates certain rebuttable presumptions as to the enforceability of covenants not to compete. Establishes remedies and procedures for enforcing covenants not to compete. Effective January 1, 2013.


LRB097 17554 JLS 62760 b

 

 

A BILL FOR

 

HB4976LRB097 17554 JLS 62760 b

1    AN ACT concerning business.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 1. Short title. This Act may be cited as the
5Illinois Covenants Not to Compete Act.
 
6    Section 5. Definitions. As used in this Act, the following
7definitions apply:
8    (a) "Promisor" means a party against whom a covenant not to
9compete is sought to be enforced.
10    (b) "Promisee" means a party seeking to enforce a covenant
11not to compete.
12    (c) "Covenant not to compete" means a restriction which
13prevents a promisor from working for or providing personal
14services to a person or entity in competition with the
15promisee.
16    (d) "Key employee" or "key independent contractor" means
17any employee or independent contractor who: (i) has substantial
18involvement in the executive management of the promisee's
19business, (ii) has direct and substantial contact with
20customers of the promisee, (iii) has knowledge of bona fide
21trade secrets or other proprietary information of the promisee,
22(iv) has such unique skills that the person has achieved a high
23degree of public or industry notoriety, fame, or reputation as

 

 

HB4976- 2 -LRB097 17554 JLS 62760 b

1a representative of the promisee, or (v) is among the highest
2paid 5% of the promisee's employees or independent contractors
3in the year preceding a separation from service by the key
4employee or key independent contractor.
5    (e) "Legitimate business interest" means: (i) customer
6relationships developed and maintained by the promisee, (ii)
7trade secrets or other proprietary information of the promisee
8to which a promisor was granted meaningful or regular access,
9or (iii) business goodwill of the promisee.
10    (f) "News media" means a newspaper or other periodical
11issued at regular intervals whether in print or electronic
12format, a news service whether in print or electronic format, a
13radio station, a television station, a television network, a
14community antenna television service, or a person or
15corporation engaged in making news reels or other motion
16picture news for public showing.
17    (g) "Trade secrets" means any trade secrets as defined in
18the Illinois Trade Secrets Act and the common law under such
19Act.
 
20    Section 10. Criteria for enforceability of covenants not to
21compete. A covenant not to compete is void as an illegal
22restraint of trade and may not be enforced by a court in this
23State, unless:
24    (a) the promisee is a key employee or key independent
25contractor;

 

 

HB4976- 3 -LRB097 17554 JLS 62760 b

1    (b) the promisor either: (i) informs the key employee or
2key independent contractor in a written offer at least 2 weeks
3prior to the first day of the employment or contractor
4relationship that a covenant not to compete is required as a
5condition of employment or services, or (ii) enters into the
6covenant not to compete with the promisee upon: (A) a material
7advancement or promotion of the key employee or key independent
8contractor, or (B) payment of a material bonus or material
9increase in rate of regular compensation; and
10    (c) the covenant not to compete is narrowly tailored to
11support the protection of a legitimate business interest of the
12promisee against actual or threatened infringement by the
13promisor.
 
14    Section 15. Rebuttable presumptions.
15    (a) A covenant not to compete will be presumed not to meet
16the criteria under subsection (c) of Section 10 if: (i) the
17duration of the covenant not to compete exceeds one year, (ii)
18the geographic area of the covenant not compete extends beyond
19any region in which the key employee or key independent
20contractor provided employment or contractor services for the
21promisee during the one year preceding termination of the
22employment or independent contractor relationship, or (iii)
23the type of personal services activity subject to the covenant
24not to compete extends beyond the nature of work the key
25employee or key independent contractor provided to the promisee

 

 

HB4976- 4 -LRB097 17554 JLS 62760 b

1during the one year preceding termination of the employment or
2independent contractor relationship.
3    (b) A promisee may introduce evidence to rebut the
4presumptions in subsection (a) of this Section upon a showing
5that more extensive restrictions are necessary to protect a
6legitimate business interest.
 
7    Section 20. Remedies and procedures in actions to enforce
8covenants not to compete.
9    (a) Modification. For any action brought to enforce a
10covenant not to compete in which the covenant is found not to
11meet the criteria in subsection (c) of Section 10, the court
12retains discretion to modify the covenant not to compete to the
13extent necessary to make the restraint reasonable under the
14circumstances. If the court so modifies the covenant, the court
15may not award the promisee any damages for a breach of the
16covenant not to compete occurring before an order of
17modification.
18    (b) Attorney's Fees and Costs of Litigation. For any action
19brought to enforce a covenant not to compete in which the
20subject agreement contains a provision granting the promisee a
21right to recover attorney's fees or other costs of litigation
22from the promisor, such provision shall be construed to provide
23the promisor with a mutual entitlement to attorney's fees or
24other costs of litigation should it be the prevailing party
25against the promisee.

 

 

HB4976- 5 -LRB097 17554 JLS 62760 b

1    (c) Declaratory Judgment. Any promisor has the right to
2file an action under Section 2-701 of the Code of Civil
3Procedure for a declaration of his or her rights under a
4covenant not to compete, and in the event the promisor is the
5prevailing party in such a proceeding, the court may award him
6or her reasonable attorney's fees and court costs.
 
7    Section 25. Exceptions. This Act does not apply to and
8shall not modify the common law with respect to:
9    (a) any agreement relating to the solicitation, hiring, or
10contact with employees, vendors, or customers;
11    (b) any confidentiality agreement;
12    (c) any agreement between: (i) a corporation, partnership,
13limited liability partnership, or limited liability company,
14and (ii) its shareholders, partners, or members; and
15    (d) an agreement between an employer and employee under
16which an employee receives incentive compensation of any kind,
17and where the employer is entitled to forfeiture of such
18compensation for competition.
 
19    Section 30. Act not applicable to news media. Nothing in
20this Act applies to news media.
 
21    Section 99. Effective date. This Act takes effect January
221, 2013.