It is now two years since the adoption of the Illinois Freedom to Work Act, our state’s first comprehensive statute regulating non-competes. How have courts been applying the Act?

Our review of the case law found almost no decisions applying or even discussing the Act. While a little surprising, it may simply mean that the Act is clearly written – a good thing for employers and employees.

The few cases that have interpreted the Act have applied it strictly. Employers will do well to review their agreements to ensure exact compliance with the Act’s requirements.

Overview of the Illinois Freedom to Work Act

Adopted effective January 1, 2022, the Act established compensation-based rules regarding which employees can be asked to sign non-compete and non-solicit covenants:

• Employees making $75,000 or less cannot be required to sign a “covenant not to compete.”
• Employees making $45,000 or less cannot be required to sign a covenant not to compete or a “covenant not to solicit.”

The Act also created procedural protections for employees being asked to sign covenants. The employer must advise the employee in writing to consult with an attorney. The employer also must either (a) provide a copy of the covenant to the employee 14 calendar days before his or her first day or (b) give the employee 14 days to decide whether to sign. Employees can waive the 14-day period.

So Far, Almost No Case Law Applying the Act

A review of the cases since the effective date of the Act is most notable for what one does not find: any significant case law interpreting the Act.

There does not appear to be a single case from the Illinois Appellate Court interpreting the Act. That is not unexpected given the timeline for a case to proceed to decision at the appellate level.

Somewhat surprisingly, there are also almost no decisions from federal district courts applying the Act. The few cases that cite the Act only do so in passing or to reject arguments for its application.

Three U.S. District Court Cases Citing the Act

The most substantive discussion of the Act appears in Aon PLC v. Alliant Insurance Services, Inc.,[1] a case in which plaintiff Aon sought to enforce a variety of covenants against a group of former Aon employees, including a provision that prohibited the former employees from accepting business from Aon customers even if the customers contacted them without prior solicitation. Aon argued that since the Act allows enforcement of true non-compete clauses against employees like defendants who make more than $75,000, Illinois public policy, as reflected by the Act, does not bar enforcement of less onerous no-accept clauses against such employees.

In rejecting this argument, the court noted that the Act also codified existing Illinois case law on covenants, including case law requiring that a covenant be “no greater than is required for protection of a legitimate business interest of the employer.” As a result, the no-accept provisions were subject to review for reasonableness. The court went on to find that the no-accept provisions imposed unwarranted hardships on employees and customers, and were contrary to Illinois public policy.

The other two federal district court cases citing the Act do so only to reject its applicability. In Admiin Inc. v. Kohan,[2] the court rejected defendant’s argument that the Act barred enforcement of the non-compete agreement he signed in 2020 since the Act was not adopted until January 2022 and does not have retroactive effect. Similarly, the court in ANCO Steel Company, Inc. v. JRC OPCO, LLC,[3] found that the Act did not apply to the covenant sought to be enforced since it was signed in 2020.

Cases in the Illinois Trial Courts

To the extent that there have been cases interpreting the Act in a truly substantive way, those have likely been at trial court level in the Illinois state court system. Unfortunately, those cases are not published or available online.

But thanks to my former H&H colleague, Rob Kreutzer, we do have access to a recent opinion from a trial court judge in Chicago interpreting the Act. The case serves as a reminder to Illinois employers of the importance of strict compliance with the Act’s requirements.

In ServePro of Evergreen Park/South Chicago City v. Gomez,[4] plaintiff sought to enforce a non-compete agreement against defendant, who had worked as a construction project manager for plaintiff. Defendant moved to dismiss the complaint on the grounds that the non-compete agreement was unenforceable under the Act since (a) he had not been given 14 days to review the agreement and (b) he had not been advised in writing that he should consult an attorney.

The court granted defendant’s motion to dismiss on both grounds. First, the court found that plaintiff’s failure to advise defendant that he had 14 days to review the agreement violated the Act. It was not sufficient for plaintiff to have advised defendant that he could “look over” the agreement before signing it. Although the Act does not expressly require an employer to advise the employee that they have 14 days to review the agreement, the court found that any other interpretation of the Act’s 14-day review period rule would defeat the legislature’s intent in enacting the statute.

The court also found that plaintiff failed to comply with the Act’s requirement that the employee be advised in writing to consult with an attorney. Here, the court applied the Act’s requirement quite strictly. The agreement in question stated that employee “may wish to seek independent legal advice before” signing the agreement. The Act specifies that an employee is to be advised in writing “to consult with an attorney before entering into the covenant.”

Takeaways – Follow the Act Closely

The main takeaway for employers is to follow the Act precisely and document compliance. The agreement should itself recite that the employee has 14 days to review but may choose to sign the agreement sooner.

The agreement also should use the Act’s exact language that the employee is advised “to consult with an attorney,” rather than softer language such as “may wish to” or “should consider” seeking legal advice.

The main takeaway for counsel is that courts appear to be unwilling to apply the Act to agreements signed prior to 2022, not even as a supposed statement by the Illinois legislature regarding Illinois public policy. The Act makes clear that its procedural requirements and income-based limitations apply only to agreements signed on or after January 1, 2022.

The biggest takeaway for all may be that the Act is working. If the goal was to provide clearer rules for the enforcement of non-competes and non-solicits, the lack of case law may indicate that the legislature has accomplished that objective.

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[1] Aon PLC v. Alliant Insurance Services, Inc., 2023 WL 3914886 (N.D. Ill. 2023).

[2] Admiin Inc. v. Kohan, WL 4625897 (N.D. Ill. 2023).

[3] ANCO Steel Company, Inc. v. JRC OPCO, LLC, 2023 WL 6381344 (N.D. Ind. 2023)

[4] ServePro of Evergreen Park/South Chicago City v. Gomez, 2023 CH 07960 (Cir. Ct Cook County 2023).