Beyond the Headlines: A Practical Illinois Playbook for Employee Non-Compete Agreements (Part 3)
This is Part 3 of a three-part series on non-compete agreements in Illinois. Part 1 summed up the national headlines around the FTC’s attempted non-compete ban and Part 2 covered the fundamentals of the Illinois Freedom to Work Act.
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.
Contractual Alternatives to Non-Compete Agreements
The following contractual tools can help employers protect core business interests while reducing their reliance on formal non‑compete clauses and the strict requirements imposed by the Illinois Freedom to Work Act (IFWA).
Non-Disclosure Agreements (NDAs)
Well‑drafted non‑disclosure agreements with key employees can often provide substantial protection against competitive harm without the baggage of a full non‑compete. For example, an NDA that clearly protects customer lists and pricing matrices, strategic or product‑roadmap documents, or proprietary algorithms and processes, can often prevent the conduct a non‑compete is aimed at without an outright prohibition on the former employee working for a competitor.
Lean In to Non-Solicitation
Non‑solicitation covenants (covering customers and/or employees) are still subject to the IFWA and traditional reasonableness standards. However, optics-wise they are generally viewed as less restrictive by employees than full non‑competes. Moreover, under current law non-solicitation restrictions are permitted at a lower earnings threshold.
These provisions work best when they are tightly tailored, for example by limiting restrictions to:
- customers or business partners with whom the departing employee had material contact during a defined look‑back period (often 12–18 months); and
- employees the individual directly supervised or worked closely with.
This kind of tailoring makes a non‑solicit more likely to be upheld and easier to justify as protecting a legitimate business interest.
Invention Assignment and IP Ownership
Invention assignment and intellectual property (IP) ownership agreements are another high‑value alternative to non-competes. These provisions typically require employees to:
- promptly disclose inventions and other IP created during employment;
- assign ownership of that IP to the company; and
- assist the company in securing legal protections like a patent or registered copyright when asked.
If a former employee (or their new employer) misuses that IP, the company can pursue infringement or trade‑secret claims, which often provide more targeted and powerful remedies than a broad non‑compete.
These agreements have many benefits beyond preventing unfair competition by former employees. For example, clear IP assignment agreements with an employee help establish company ownership of critical IP in fundraising and M&A transactions.
Looking Ahead: New Legislative Watch
As of late 2025, the most significant Illinois proposal on the horizon is House Bill 3213 in the 104th General Assembly. HB 3213 would amend the IFWA to:
- Prohibit employers, on and after January 1, 2026, from entering into any covenant not to compete or covenant not to solicit with any employee; and
- Declare that a covenant not to compete or not to solicit entered into on or after January 1, 2026, is illegal and void, regardless of where the covenant was signed or which state’s law it purports to apply.
On April 11, 2025, HB 3213 was re‑referred to the House Rules Committee and has not been enacted into law. Non‑competes and non‑solicits therefore remain permissible in Illinois if they comply with the IFWA and common‑law reasonableness requirements. Even so, HB 3213 signals serious legislative interest in moving toward an outright ban.
Employers should:
- monitor the bill’s progress; and
- continue strengthening alternative protections—NDAs, trade‑secret controls, non‑solicitation agreements, and IP ownership arrangements—so their risk profile on this issue remains manageable even if non‑competes are significantly curtailed in the future.
Bottom Line
The era of plug‑and‑play template non‑competes is over in Illinois and elsewhere. Employers now operate in an environment where:
- statutory guardrails (earnings thresholds, notice, adequate consideration, and categorical bans) significantly narrow what is enforceable;
- courts still apply a common‑law reasonableness and legitimate‑business‑interest test; and
- lawmakers are actively considering whether to eliminate non‑competes altogether.
Non‑competes should be treated as one tool in a broader restraint and IP strategy, not a default clause in every offer letter. Careful planning now can go a long way toward keeping your protections enforceable and your litigation risk in check.
This is Part 3 of a three-part series on non-compete agreements in Illinois. Part 1 summed up the national headlines around the FTC’s attempted non-compete ban and Part 2 covered the fundamentals of the Illinois Freedom to Work Act.
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.