Illinois General Assembly - Full Text of SB1838
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Full Text of SB1838  102nd General Assembly

SB1838sam001 102ND GENERAL ASSEMBLY

Sen. Mattie Hunter

Filed: 4/6/2021

 

 


 

 


 
10200SB1838sam001LRB102 11384 KTG 24496 a

1
AMENDMENT TO SENATE BILL 1838

2    AMENDMENT NO. ______. Amend Senate Bill 1838 by replacing
3everything after the enacting clause with the following:
 
4    "Section 5. The Illinois Freedom to Work Act is amended by
5changing Sections 5 and 10 and by adding Sections 7, 15, 20,
625, 30, and 35 as follows:
 
7    (820 ILCS 90/5)
8    Sec. 5. Definitions. In this Act:
9    "Adequate consideration" means (1) the employee worked for
10the employer for at least 2 years after the employee signed an
11agreement containing a covenant not to compete or a covenant
12not to solicit or (2) the employer otherwise provided
13consideration adequate to support an agreement to not compete
14or to not solicit, which could consist of a period of
15employment plus additional consideration or merely other
16consideration adequate by itself.

 

 

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1    "Covenant not to compete" means an agreement:
2        (1) between an employer and an a low-wage employee
3    that restricts the such low-wage employee from performing:
4            (A) any work for another employer for a specified
5        period of time;
6            (B) any work in a specified geographical area; or
7            (C) work for another employer that is similar to
8        the such low-wage employee's work for the employer
9        included as a party to the agreement; and
10        (2) that is entered into after the effective date of
11    this Act.
12    "Covenant not to compete" also means an agreement between
13an employer and an employee, entered into after the effective
14date of this amendatory Act of the 102nd General Assembly,
15that by its terms imposes adverse financial consequences on a
16former employee if the employee engages in competitive
17activities after the termination of the employee's employment
18with the employer. "Covenant not to compete" does not include
19(i) a covenant not to solicit, (ii) a confidentiality
20agreement or covenant, (iii) a covenant or agreement
21prohibiting use or disclosure of trade secrets or inventions,
22(iv) invention assignment agreements or covenants, (v) a
23covenant or agreement entered into by a person purchasing or
24selling the goodwill of a business or otherwise acquiring or
25disposing of an ownership interest, (vi) clauses or an
26agreement between an employer and an employee requiring

 

 

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1advance notice of termination of employment, during which
2notice period the employee remains employed by the employer
3and receives compensation, or (vii) agreements by which the
4employee agrees not to reapply for employment to the same
5employer after termination of the employee.
6    "Covenant not to solicit" means an agreement that is
7entered into after the effective date of this amendatory Act
8of the 102nd General Assembly between an employer and an
9employee that (i) restricts the employee from soliciting for
10employment the employer's employees or (ii) restricts the
11employee from soliciting for the purpose of selling products
12or services of any kind to, or from interfering with the
13employer's relationships with, the employer's clients,
14prospective clients, vendors, prospective vendors, suppliers,
15prospective suppliers, or other business relationships.
16    "Earnings" means the compensation, including earned
17salary, earned bonuses, earned commissions, or any other form
18of taxable compensation, reflected or that is expected to be
19reflected as wages, tips, and other compensation on the
20employee's IRS Form W-2 plus any elective deferrals not
21reflected as wages, tips, and other compensation on the
22employee's IRS Form W-2, such as, without limitation, employee
23contributions to a 401(k) plan, a 403(b) plan, a flexible
24spending account, or a health savings account, or commuter
25benefit-related deductions.
26    "Employee" has the meaning ascribed to that term in

 

 

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1Section 2 of the Illinois Wage Payment and Collection Act and
2includes individuals currently or formerly employed by an
3employer.
4    "Employer" has the meaning given to such term in
5subsection (c) of Section 3 of the Minimum Wage Law.
6"Employer" does not include governmental or quasi-governmental
7bodies.
8    "Low-wage employee" means an employee whose earnings do
9not exceed the greater of (1) the hourly rate equal to the
10minimum wage required by the applicable federal, State, or
11local minimum wage law or (2) $13.00 per hour.
12(Source: P.A. 99-860, eff. 1-1-17; 100-225, eff. 8-18-17.)
 
13    (820 ILCS 90/7 new)
14    Sec. 7. Legitimate business interest of the employer. In
15determining the legitimate business interest of the employer
16(consistent with the decision of the Supreme Court of Illinois
17in Reliable Fire Equipment Company v. Arredondo, 2011 IL
18111871), the totality of the facts and circumstances of the
19individual case shall be considered. Factors that may be
20considered in this analysis include, but are not limited to,
21the employee's exposure to the employer's customer
22relationships or other employees, the near-permanence of
23customer relationships, the employee's acquisition, use, or
24knowledge of confidential information through the employee's
25employment, the time restrictions, the place restrictions, and

 

 

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1the scope of the activity restrictions. No factor carries any
2more weight than any other, but rather its importance will
3depend on the specific facts and circumstances of the
4individual case. Such factors are only nonconclusive aids in
5determining the employer's legitimate business interest, which
6in turn is but one component in the three-prong rule of reason,
7grounded in the totality of the circumstances. Each situation
8must be determined on its own particular facts. Reasonableness
9is gauged not just by some but by all of the circumstances. The
10same identical contract and restraint may be reasonable and
11valid under one set of circumstances and unreasonable and
12invalid under another set of circumstances.
 
13    (820 ILCS 90/10)
14    Sec. 10. Prohibiting covenants not to compete for low-wage
15employees.
16    (a) A covenant not to compete shall not be valid or
17enforceable unless the employee's actual or expected
18annualized rate of earnings exceeds $75,000 per year. This
19figure shall increase to $80,000 per year beginning on January
201, 2027, $85,000 per year beginning on January 1, 2032, and
21$90,000 per year beginning on January 1, 2037. No employer
22shall enter into a covenant not to compete with any low-wage
23employee of the employer.
24    (b) A covenant not to solicit shall not be valid or
25enforceable unless the employee's actual or expected

 

 

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1annualized rate of earnings exceeds $45,000 per year. This
2figure shall increase to $47,500 per year beginning on January
31, 2027, $50,000 per year beginning on January 1, 2032, and
4$52,500 per year beginning on January 1, 2037. A covenant not
5to compete entered into between an employer and a low-wage
6employee is illegal and void.
7    (c) A covenant not to compete is void and illegal for any
8employee who an employer terminates or furloughs or lays off
9as the result of business circumstances or governmental orders
10related to the COVID-19 pandemic, or under circumstances that
11are similar to the COVID-19 pandemic, unless enforcement of
12the covenant not to compete includes compensation equivalent
13to the employee's base salary at the time of termination for
14the period of enforcement minus compensation earned through
15subsequent employment during the period of enforcement.
16    (d) A covenant not to compete is void and illegal for
17individuals covered by a collective bargaining agreement under
18the Illinois Public Labor Relations Act or the Illinois
19Educational Labor Relations Act.
20(Source: P.A. 99-860, eff. 1-1-17.)
 
21    (820 ILCS 90/15 new)
22    Sec. 15. Enforceability of a covenant not to compete or a
23covenant not to solicit. A covenant not to compete or a
24covenant not to solicit is illegal and void unless (i) the
25employee receives adequate consideration, (ii) the covenant is

 

 

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1ancillary to a valid employment relationship, (iii) the
2covenant is no greater than is required for the protection of a
3legitimate business interest of the employer, (iv) the
4covenant does not impose undue hardship on the employee, and
5(v) the covenant is not injurious to the public.
 
6    (820 ILCS 90/20 new)
7    Sec. 20. Ensuring employees are informed about their
8obligations. A covenant not to compete or a covenant not to
9solicit is illegal and void unless (i) the employer advises
10the employee in writing to consult with an attorney before
11entering into the covenant and (ii) the employer provides the
12employee with a copy of the covenant at least 14 calendar days
13before the commencement of the employee's employment or the
14employer provides the employee with at least 14 calendar days
15to review the covenant. An employer is in compliance with this
16Section even if the employee voluntarily elects to sign the
17covenant before the expiration of the 14-day period.
 
18    (820 ILCS 90/25 new)
19    Sec. 25. Remedies. In addition to any remedies available
20under any agreement between an employer and an employee or
21under any other statute, in a civil action or arbitration
22filed by an employer (including, but not limited to, a
23complaint or counterclaim), if an employee prevails on a claim
24to enforce a covenant not to compete or a covenant not to

 

 

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1solicit, the employee shall recover from the employer all
2costs and all reasonable attorney's fees regarding such claim
3to enforce a covenant not to compete or a covenant not to
4solicit.
 
5    (820 ILCS 90/30 new)
6    Sec. 30. Reformation.
7    (a) Extensive judicial reformation of a covenant not to
8compete or a covenant not to solicit may be against the public
9policy of this State and a court may refrain from wholly
10rewriting contracts.
11    (b) In some circumstances, a court may, in its discretion,
12choose to reform or sever provisions of a covenant not to
13compete or a covenant not to solicit rather than hold such
14covenant unenforceable. Factors which may be considered when
15deciding whether such reformation is appropriate include the
16fairness of the restraints as originally written, whether the
17original restriction reflects a good-faith effort to protect a
18legitimate business interest of the employer, the extent of
19such reformation, and whether the parties included a clause
20authorizing such modifications in their agreement.
 
21    (820 ILCS 90/35 new)
22    Sec. 35. Severability. The provisions of this Act are
23severable under Section 1.31 of the Statute on Statutes.
 

 

 

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1    Section 99. Effective date. This Act takes effect on
2January 1, 2022.".