Beyond the Headlines: A Practical Illinois Playbook for Employee Non-Compete Agreements (Part 1)
If you’re an Illinois employer struggling to understand the proper approach to employee non-compete agreements, you’re not alone. On top of recent, headline-grabbing moves at the federal level, the state-to-state divide on the legality and limitations of employee non-competes continues to widen.
This guide walks through what has happened recently at the federal level, explains the current requirements of Illinois law, and offers practical ideas for protecting your business going forward.
The Short-Lived National Ban
In April 2024, the Federal Trade Commission (FTC) adopted a nationwide rule that would have banned most post‑employment non‑competes, labeling them an unfair method of competition. In August 2024, a federal district court in Texas vacated the rule nationwide, holding that the FTC lacked authority to issue such a sweeping regulation. As a result of the Texas court ruling and later proceedings, there is no federal non‑compete ban in force today.
That said, the FTC has continued to pursue non‑compete provisions it views as anticompetitive through case‑by‑case enforcement under its unfair‑competition authority, with high-profile industries or unusually aggressive restrictions most likely to draw federal scrutiny.
Restrictions Continue at the State Level, Including in Illinois
In Illinois, employers must comply with the Illinois Freedom to Work Act (IFWA), 820 ILCS 90, which was significantly amended effective January 1, 2022. This guide is intended for Illinois employers using or considering the use of post‑employment non‑compete and non‑solicitation agreements. It outlines steps employers can take to protect legitimate business interests while reducing the risk of costly litigation or of having agreements declared unenforceable.
Rather than banning non‑competes outright, Illinois has chosen a restrictive approach. In particular, in Illinois non-compete agreements are subject to earnings thresholds, mandatory notice and review periods, “adequate consideration” requirements, and categorical prohibitions for certain sectors. Understanding those building blocks is essential before presenting an employee with a non-compete agreement or seeking to enforce a non-compete restriction an employee previously signed.
Illinois employers with workers in other states, including remote employees, should keep in mind that employees often carry their home state’s protections with them. Determining which state’s law applies, and whether contractual strategies can mitigate the impact of jurisdictions hostile to non-competes, is a fact-specific exercise that should be undertaken with experienced legal counsel.
More broadly, state‑level momentum to restrict, limit, or completely prohibit non‑competes has accelerated in recent years. For example, California has long prohibited post‑employment non‑compete agreements. The state recently strengthened that prohibition by requiring employers to notify certain current and former employees that existing non‑compete clauses are void. Minnesota’s ban, effective July 1, 2023, is one of the broadest in the country: non‑competes entered into on or after that date are generally void and unenforceable.
Beyond outright bans, Illinois and other states—including Colorado, Washington, Oregon, Massachusetts, and Virginia—have adopted income thresholds, notice requirements, and other guardrails. This patchwork makes “one size fits all” non‑competes especially risky for employers with multi‑state or distributed workforces.
This is Part 1 of a three-part series on non-compete agreements in Illinois. Part 2 will cover the fundamentals of the Illinois Freedom to Work Act, and Part 3 will explore contractual alternatives and the legislative outlook. Stay tuned for the remaining installments later this month.
At Replogle Legal Group, we help Illinois and New York businesses negotiate complex deals, build strategic partnerships and protect innovation. Schedule your free consultation today using the online calendar at the link below or contact Ryan Replogle by phone or email.