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

SB1838sam002 102ND GENERAL ASSEMBLY

Sen. Mattie Hunter

Filed: 5/18/2021

 

 


 

 


 
10200SB1838sam002LRB102 11384 JLS 26448 a

1
AMENDMENT TO SENATE BILL 1838

2    AMENDMENT NO. ______. Amend Senate Bill 1838, AS AMENDED,
3by replacing everything after the enacting clause with the
4following:
 
5    "Section 5. The Illinois Freedom to Work Act is amended by
6changing Sections 5 and 10 and by adding Sections 7, 15, 20,
725, 30, 35, and 97 as follows:
 
8    (820 ILCS 90/5)
9    Sec. 5. Definitions. In this Act:
10    "Adequate consideration" means (1) the employee worked for
11the employer for at least 2 years after the employee signed an
12agreement containing a covenant not to compete or a covenant
13not to solicit or (2) the employer otherwise provided
14consideration adequate to support an agreement to not compete
15or to not solicit, which consideration can consist of a period
16of employment plus additional professional or financial

 

 

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1benefits or merely professional or financial benefits adequate
2by themselves.
3    "Covenant not to compete" means an agreement: (1) between
4an employer and an a low-wage employee that is entered into
5after the effective date of this amendatory Act of the 102nd
6General Assembly that restricts the such low-wage employee
7from performing:
8            (1) (A) any work for another employer for a
9        specified period of time;
10            (2) (B) any work in a specified geographical area;
11        or
12            (3) (C) work for another employer that is similar
13        to such low-wage employee's work for the employer
14        included as a party to the agreement. ; and
15        (2) that is entered into after the effective date of
16    this Act.
17    "Covenant not to compete" also means an agreement between
18an employer and an employee, entered into after the effective
19date of this amendatory Act of the 102nd General Assembly,
20that by its terms imposes adverse financial consequences on
21the former employee if the employee engages in competitive
22activities after the termination of the employee's employment
23with the employer.
24    "Covenant not to compete" does not include (1) a covenant
25not to solicit, (2) a confidentiality agreement or covenant,
26(3) a covenant or agreement prohibiting use or disclosure of

 

 

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1trade secrets or inventions, (4) invention assignment
2agreements or covenants, (5) a covenant or agreement entered
3into by a person purchasing or selling the goodwill of a
4business or otherwise acquiring or disposing of an ownership
5interest, (6) clauses or an agreement between an employer and
6an employee requiring advance notice of termination of
7employment, during which notice period the employee remains
8employed by the employer and receives compensation, or (7)
9agreements by which the employee agrees not to reapply for
10employment to the same employer after termination of the
11employee.
12    "Covenant not to solicit" means an agreement that is
13entered into after the effective date of this amendatory Act
14of the 102nd General Assembly between an employer and an
15employee that (1) restricts the employee from soliciting for
16employment the employer's employees or (2) restricts the
17employee from soliciting, for the purpose of selling products
18or services of any kind to, or from interfering with the
19employer's relationships with, the employer's clients,
20prospective clients, vendors, prospective vendors, suppliers,
21prospective suppliers, or other business relationships.
22    "Earnings" means the compensation, including earned
23salary, earned bonuses, earned commissions, or any other form
24of taxable compensation, reflected or that is expected to be
25reflected as wages, tips, and other compensation on the
26employee's IRS Form W-2 plus any elective deferrals not

 

 

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1reflected as wages, tips, and other compensation on the
2employee's IRS Form W-2, such as, without limitation, employee
3contributions to a 401(k) plan, a 403(b) plan, a flexible
4spending account, or a health savings account, or commuter
5benefit-related deductions.
6    "Employee" means any individual permitted to work by an
7employer in an occupation.
8    "Employer" has the meaning given to such term in
9subsection (c) of Section 3 of the Minimum Wage Law.
10"Employer" does not include governmental or quasi-governmental
11bodies.
12    "Construction" means any constructing, altering,
13reconstructing, repairing, rehabilitating, refinishing,
14refurbishing, remodeling, remediating, renovating, custom
15fabricating, maintenance, landscaping, improving, wrecking,
16painting, decorating, demolishing, and adding to or
17subtracting from any building, structure, highway, roadway,
18street, bridge, alley, sewer, ditch, sewage disposal plant,
19water works, parking facility, railroad, excavation or other
20structure, project, development, real property or improvement,
21or to do any part thereof, whether or not the performance of
22the work herein described involves the addition to, or
23fabrication into, any structure, project, development, real
24property or improvement herein described of any material or
25article of merchandise.
26    "Low-wage employee" means an employee whose earnings do

 

 

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1not exceed the greater of (1) the hourly rate equal to the
2minimum wage required by the applicable federal, State, or
3local minimum wage law or (2) $13.00 per hour.
4(Source: P.A. 99-860, eff. 1-1-17; 100-225, eff. 8-18-17.)
 
5    (820 ILCS 90/7 new)
6    Sec. 7. Legitimate business interest of the employer. In
7determining the legitimate business interest of the employer,
8the totality of the facts and circumstances of the individual
9case shall be considered. Factors that may be considered in
10this analysis include, but are not limited to, the employee's
11exposure to the employer's customer relationships or other
12employees, the near-permanence of customer relationships, the
13employee's acquisition, use, or knowledge of confidential
14information through the employee's employment, the time
15restrictions, the place restrictions, and the scope of the
16activity restrictions. No factor carries any more weight than
17any other, but rather its importance will depend on the
18specific facts and circumstances of the individual case. Such
19factors are only non-conclusive aids in determining the
20employer's legitimate business interest, which in turn is but
21one component in the 3-prong rule of reason, grounded in the
22totality of the circumstances. Each situation must be
23determined on its own particular facts. Reasonableness is
24gauged not just by some, but by all of the circumstances. The
25same identical contract and restraint may be reasonable and

 

 

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1valid under one set of circumstances and unreasonable and
2invalid under another set of circumstances.
 
3    (820 ILCS 90/10)
4    Sec. 10. Prohibiting covenants not to compete and
5covenants not to solicit for low-wage employees.
6    (a) No employer shall enter into a covenant not to compete
7with any employee unless the employee's actual or expected
8annualized rate of earnings exceeds $75,000 per year. This
9amount shall increase to $80,000 per year beginning on January
101, 2027, $85,000 per year beginning on January 1, 2032, and
11$90,000 per year beginning on January 1, 2037. A covenant not
12to compete entered into in violation of this subsection is
13void and unenforceable. No employer shall enter into a
14covenant not to compete with any low-wage employee of the
15employer.
16    (b) No employer shall enter into a covenant not to solicit
17with any employee unless the employee's actual or expected
18annualized rate of earnings exceeds $45,000 per year. This
19amount shall increase to $47,500 per year beginning on January
201, 2027, $50,000 per year beginning on January 1, 2032, and
21$52,500 per year beginning on January 1, 2037. A covenant not
22to solicit entered into in violation of this subsection is
23void and unenforceable. A covenant not to compete entered into
24between an employer and a low-wage employee is illegal and
25void.

 

 

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1    (c) No employer shall enter into a covenant not to compete
2or a covenant not to solicit with any employee who an employer
3terminates or furloughs or lays off as the result of business
4circumstances or governmental orders related to the COVID-19
5pandemic or under circumstances that are similar to the
6COVID-19 pandemic, unless enforcement of the covenant not to
7compete includes compensation equivalent to the employee's
8base salary at the time of termination for the period of
9enforcement minus compensation earned through subsequent
10employment during the period of enforcement. A covenant not to
11compete or a covenant not to solicit entered into in violation
12of this subsection is void and unenforceable.
13    (d) A covenant not to compete is void and illegal with
14respect to individuals covered by a collective bargaining
15agreement under the Illinois Public Labor Relations Act or the
16Illinois Educational Labor Relations Act and individuals
17employed in construction. This subsection (d) does not apply
18to construction employees who primarily perform management,
19engineering or architectural, design, or sales functions for
20the employer or who are shareholders, partners, or owners in
21any capacity of the employer.
22(Source: P.A. 99-860, eff. 1-1-17.)
 
23    (820 ILCS 90/15 new)
24    Sec. 15. Enforceability of a covenant not to compete or a
25covenant not to solicit. A covenant not to compete or a

 

 

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

 

 

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1complaint or counterclaim), if an employee prevails on a claim
2to enforce a covenant not to compete or a covenant not to
3solicit, the employee shall recover from the employer all
4costs and all reasonable attorney's fees regarding such claim
5to enforce a covenant not to compete or a covenant not to
6solicit, and the court or arbitrator may award appropriate
7relief.
 
8    (820 ILCS 90/30 new)
9    Sec. 30. Attorney General enforcement.
10    (a) Whenever the Attorney General has reasonable cause to
11believe that any person or entity is engaged in a pattern and
12practice prohibited by this Act, the Attorney General may
13initiate or intervene in a civil action in the name of the
14People of the State in any appropriate court to obtain
15appropriate relief.
16    (b) Before initiating an action, the Attorney General may
17conduct an investigation and may: (1) require an individual or
18entity to file a statement or report in writing under oath or
19otherwise, as to all information the Attorney General may
20consider necessary; (2) examine under oath any person alleged
21to have participated in or with knowledge of the alleged
22violation; or (3) issue subpoenas or conduct hearings in aid
23of any investigation.
24    (c) Service by the Attorney General of any notice
25requiring a person or entity to file a statement or report, or

 

 

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1of a subpoena upon any person or entity, shall be made:
2        (1) personally by delivery of a duly executed copy
3    thereof to the person to be served or, if a person is not a
4    natural person, in the manner provided in the Code of
5    Civil Procedure when a complaint is filed; or
6        (2) by mailing by certified mail a duly executed copy
7    thereof to the person to be served at his or her last known
8    abode or principal place of business within this State or,
9    if a person is not a natural person, in the manner provided
10    in the Code of Civil Procedure when a complaint is filed.
11    The Attorney General may compel compliance with
12investigative demands under this Section through an order by
13any court of competent jurisdiction.
14    (d)(1) In an action brought under this Act, the Attorney
15General may obtain, as a remedy, monetary damages to the
16State, restitution, and equitable relief, including any
17permanent or preliminary injunction, temporary restraining
18order, or other order, including an order enjoining the
19defendant from engaging in a violation, or order any action as
20may be appropriate. In addition, the Attorney General may
21request and the court may impose a civil penalty not to exceed
22$5,000 for each violation or $10,000 for each repeat violation
23within a 5-year period. For purposes of this Section, each
24violation of this Act for each person who was subject to an
25agreement in violation of this Act shall constitute a separate
26and distinct violation.

 

 

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1    (2) A civil penalty imposed under this subsection shall be
2deposited into the Attorney General Court Ordered and
3Voluntary Compliance Payment Projects Fund. Moneys in the Fund
4shall be used, subject to appropriation, for the performance
5of any function pertaining to the exercise of the duties of the
6Attorney General, including but not limited to enforcement of
7any law of this State and conducting public education
8programs; however, any moneys in the Fund that are required by
9the court or by an agreement to be used for a particular
10purpose shall be used for that purpose.
 
11    (820 ILCS 90/35 new)
12    Sec. 35. Reformation.
13    (a) Extensive judicial reformation of a covenant not to
14compete or a covenant not to solicit may be against the public
15policy of this State and a court may refrain from wholly
16rewriting contracts.
17    (b) In some circumstances, a court may, in its discretion,
18choose to reform or sever provisions of a covenant not to
19compete or a covenant not to solicit rather than hold such
20covenant unenforceable. Factors which may be considered when
21deciding whether such reformation is appropriate include the
22fairness of the restraints as originally written, whether the
23original restriction reflects a good-faith effort to protect a
24legitimate business interest of the employer, the extent of
25such reformation, and whether the parties included a clause

 

 

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1authorizing such modifications in their agreement.
 
2    (820 ILCS 90/97 new)
3    Sec. 97. Severability. The provisions of this Act are
4severable under Section 1.31 of the Statute on Statutes.
 
5    Section 99. Effective date. This Act takes effect January
61, 2022.".