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Federal Restrictions on Non-competes Likely Dead but Illinois Limits Remain

We’ve been following with interest the efforts of the Federal Trade Commission (FTC) to prohibit most non-compete clauses in employment agreements. As we described in a prior alert, the FTC’s rule, which was to take effect on September 4, 2024, was struck down by a federal district court in Texas. Thereafter, a federal court in Louisiana also invalidated the rule. While the FTC has appealed these decisions, the agency may not follow through after the change in presidential administrations. President-elect Trump has nominated one of the two FTC commissioners who voted against the rule to head the FTC.

Illinois employers should be aware that the Illinois Freedom to Work Act, which restricts covenants not to compete in Illinois, remains in effect and has recently been expanded. The amendments taking effect on January 1, 2025 prohibit any covenant not to compete or covenant not to solicit “if the enforcement of the covenant not to compete or covenant not to solicit is likely to result in an increase in cost or difficulty for any veteran or first responder seeking mental health services” (P.A. 103-915). In addition to this new restriction, the Illinois Freedom to Work Act prohibits covenants not to compete for employees who earn less than $75,000 per year. A covenant not to compete is illegal if the employee does not receive adequate consideration for entering into the covenant; the covenant is greater than is required to protect the employer’s legitimate business interest; the covenant imposes undue hardship on the employee; or the covenant injures the interest of the public. Employers must also give the employee 14 days to review the covenant and advise the employee to consult with an attorney.

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This article was written by Pat King.

For further information on non-competes, contact Pat at [email protected] or send a message through our contact form.