Non-Compete Lawyers in Naperville and Chicago

Understanding Non-Compete Agreements in Illinois

Our Chicago noncompete lawyers have been leading the fights against unfair restrictive covenants for years in the Illinois courts, the legislature and the media.

In 2023, we submitted comments before the Federal Trade Commission about why non-compete and non-solicitation agreements are inappropriate in the workplace. Click here to read it.

In 2023, the Chicago Tribune published our Op-Ed explaining why non-competes are not appropriate in the workplace. [link to: Op-ed: Eliminating noncompete contracts will empower employees (chicagotribune.com)] The text of the Op-Ed follows:

The Federal Trade Commission has proposed an imminent ban on noncompete contracts. Prohibiting these contracts is an important step toward assuring we still have access to the American Dream. It will help businesses innovate in our tight labor market, ensure workers are not stuck in dead-end jobs and make the United States more competitive with regards to our foreign counterparts.

If you’ve been employed, odds are that at some point you have heard of noncompete contracts, and there is a good chance you may have signed one. Historically, businesses used them with high-level executives to prevent them from taking trade secrets to competitors. However, in the last half century, many businesses have abused noncompete contracts by using them to avoid competition or prevent workers from leaving.

For example, I have defended in court non-English-speaking cleaning people who were sued for having the audacity to switch jobs in violation of their noncompete contracts. The Illinois attorney general once sued Jimmy John’sover its use of noncompete contracts for sandwich-makers. The list of noncompete abuses is long and gut-wrenching and there is no right to a free lawyer when a worker is sued for violating a noncompete contract.

Building upon and invoking existing antitrust law, the FTC proposes that noncompete clauses be barred as an unfair method of competition. The rule also would require employers to rescind any existing noncompete clauses. The evidence examined by the FTC demonstrates that noncompete clauses suppress wages, reduce competition and stifle innovation.

Workers bound by noncompete clauses regularly ask employment lawyers: “I signed a stack of onboarding paperwork on my first day on the job that had a noncompete. It isn’t enforceable, is it?” They are shocked to learn how much it will cost to “get out” of their noncompete contract when they are sued. As a result, few employees ever challenge noncompete contracts and instead reluctantly comply with them while giving up better job opportunities, resulting in less money for them and their families.

FTC economists estimated that noncompete contracts suppress American workers’ income by $250 billion to $296 billion per year. This is not surprising. Why would an employer pay competitively if an employee is contractually prohibited from leaving?

Equally troubling, even if an employee is willing to take the risk of getting sued, many prospective employers simply will not hire a candidate subject to a noncompete contract. Whether or not the fear is realistic, prospective employers today rarely perceive hiring a worker as being worth the risk of getting dragged into a lawsuit.

Noncompete contracts also hurt innovation by preventing competitors, particularly startups, from hiring talented workers. Entrepreneurship and startups are historically a driver of job creation and technological advancement. However, noncompete clauses prevent people with good ideas from being able to interact with others, killing innovation at the start. On top of that, new companies and startups have a harder time finding qualified talent because prospective employees are tied up with noncompete contracts. Likewise, many entrepreneurs cannot start a new business, which results in fewer marketplace options for consumers.

The proof is in the Golden State: In California — which has long banned noncompete agreements — worker mobility helped launch that state’s roster of high-tech companies, which includes Apple, Google, Facebook and Uber. Innovation and hard work — in other words, our human resources — are always what have made America competitive against our foreign competitors.

Some companies, particularly those businesses that have their employees locked up with noncompete contracts, are wary of doing away with noncompete clauses. It is important to recognize that the FTC is not proposing to ban nondisclosure agreements, confidentiality or trade secret laws. Therefore, businesses will continue to have ample protection for their business interests.

These companies, however, will need to rely on courting their talent, instead of threatening to take their talent to court.

Do Illinois and Chicago courts enforce non-competes

In Illinois, a non-compete agreement is an agreement signed by an employee often upon being hired or upon acceptance of a severance package. The non-compete agreement typically limits an employee from competing with their former employer during and after termination of employment.

Non-competes protect an employer from competition by:

• Restricting the geographical area in which an employee can work if their new position operates in the same industry as their previous employment
• Restricting an employee from using an employer’s confidential information for their or their new employer's benefit

A typical non-compete agreement says something to the effect of “Employee agrees they will not work for any similar business in the same or a similar role within 10 miles of an employer’s headquarters during employment and for 1 year thereafter.”

Fish Potter Bolaños, P.C. has extensive experience helping Naperville & Chicago residents review their non-compete agreements. Schedule your case review by calling (312) 818-2407.

Are Non-Completes & Non-Solicit Agreements Enforceable in Illinois?

In Illinois, non-compete agreements are only enforceable if they protect legitimate business interests.

A legitimate business interest is determined from the totality of the circumstances, including:

• the near permanence of customer relationships.
• the employee’s acquisition of confidential information through his employment.
• time and place restrictions.

Whether or not a non-compete agreement is enforceable is dependent on the individual agreement at issue. Illinois courts, under certain circumstances, will enforce a non-compete contracts when the terms of the agreement are reasonable. That is, the agreement will be deemed valid when it is limited in duration and geographical scope and when it is narrowly tailored to protect only that information which needs protection (i.e. confidential or sensitive information).

In essence, to be enforceable, the employer must be able to show it has a legitimate business interest in protecting the information it seeks to keep confidential.

Some of the relevant factors in Illinois to determine if a non-compete agreement is enforceable are:

• whether the non-compete agreement is no greater than required to protect the employer’s business interest.
• whether the non-compete agreement imposes undue hardship on the employee.
• whether enforcing the non-compete agreement would prove harmful to the public.

Importantly, in determining whether an agreement is valid, courts attempt to balance the employee’s right to earn a living against the employer’s interest in protecting its information.

A court may deem an agreement unenforceable if it:

• is overly restrictive.
• unfairly limits the ability of workers to earn a living.
• provides for an unreasonably long period of time.
• seeks to protect information that is not sensitive or confidential.

Frequently Asked Questions

Do I have to agree to a non-compete agreement?
By law, you cannot be required to sign a non-compete agreement in Illinois. However, declining may jeopardize your current role or a potential job offer that’s on the table. Just as employees are not required to sign a non-compete agreement, employers are not beholden to maintain (or hire) employees who refuse to sign. With that said, there are some workers in Illinois where noncompete agreements are not enforceable. Examples include lower wage employees and, ironically, lawyers.

Is there a way out of a non-compete?
Yes. Employees have the right to try to negotiate the scope of a non-compete both on the front end (before signing it)-- or on the back-end (when they are trying to get a new job). Sometimes employers refuse to modify noncompete agreements. At that point, employees can seek a declaration in court that the non-compete agreement is unenforceable, invalid, or illegal. Many employers are concerned about having their “standard” non-compete deemed unenforceable as it could set a precedent to let other employees out of their agreements. In Illinois, sometimes an employee can recover their legal fees if an agreement is found unenforceable.

What makes a non-compete agreement “reasonable” vs. “unreasonable?”
Generally, the courts consider the following factors when determining the reasonableness of a non-compete agreement:

• whether the employer is protecting a legitimate business interest by enforcing the non-compete.
• whether the agreement has been enforced in the past, and for how long;
• whether the employer offered the employee extra compensation or additional benefits for signing the agreement;
• whether the geographic scope of the restriction prevents the employee from making a living;
• whether the agreement prevents the employee from performing a very different type of work than what they currently do.

What happens when you violate a signed non-compete agreement?
Violating a non-compete agreement may result in different outcomes. While some employers may choose to do nothing, they are within their rights to sue an employee for breaking the agreement. They may seek an injunction to prevent the employee from further violations. The court typically handles situations like this in an expedited manner, as the employer’s business interests are believed to be at stake, so time to hire an attorney and take action will be limited.

What can/should be negotiated in a non-compete agreement?
If you’re going to agree to a non-compete as an employee, it’s in your best interests to focus on three elements specifically:

1. Carve outs—Try to carve out things that matter to you. For example, if you are bringing a book of business, ask to have those clients carved out. If there are particular employers you would want to work at, consider asking them to eliminated.
2. Duration – Most non-compete agreements last for two years or less, so your goal should be to limit the duration of your non-compete to as little time as possible Aim for six months to a year if possible.
3. Geographic scope – As much as possible, try to limit the area of restriction to only what your employer is most concerned about. You’ll want to avoid industry-wide restrictions and geographic boundaries that cover large territories.

Can Employers Agree Not To Hire Each Others’ Employees?

Agreements among competitors not to hire each other’s employees are closely scrutinized. In Illinois, there have been cases challenging these restrictions as anti-competitive and/or alleging non-solicit agreements (even if not in writing) as antitrust violations. So called non-solicitation/no-poach agreements are closely scrutinized when there is no legitimate purpose for the restriction. Likewise, competitor agreements to limit the salary or compensation paid to employees can subject employers to antitrust liability.

How Fish Potter Bolaños, P.C. Can Help with Your Non-Compete Case

At Fish Potter Bolaños, P.C., our non-compete lawyers share over a century of experience handling labor and employment disputes, and we’re here to help you through this difficult time. We understand the complexities of non-compete and non-solicit agreements as they pertain to current positions of employment and job offers. If you have questions about the terms of an agreement as an employee, we can review and advise. If you need help enforcing an agreement as a local small-business owner, we can help with that too.