Illinois has never banned non-compete agreements, but since January 1, 2022 it has regulated them closely. Amendments to the Illinois Freedom to Work Act set out who can be asked to sign one, what the employer must give in return, and how the employee must be told about it. Agreements that follow the rules are still enforced regularly. Agreements copied from an older template often are not.
Who can be bound
The Act sets earnings floors. A non-compete is void for an employee whose actual or expected annualized earnings are $75,000 or less. A covenant not to solicit customers or co-workers is void for an employee earning $45,000 or less. Both figures rise on January 1, 2027, to $80,000 and $47,500, and step up again every five years after that.
Earnings are defined broadly and include bonuses and commissions, so the test is what the employee actually earns, not the base salary in the offer letter. Agreements with employees close to the line should be reviewed whenever compensation changes, and every template should be updated before the 2027 thresholds take effect.
The Act also excludes some workers altogether, including some public-sector employees covered by collective bargaining agreements and many workers in the construction industry, and later amendments have added further groups. Check the current list before using a covenant for any role that might fall within one.
What the employer must give
A covenant must be supported by adequate consideration. The Act defines that as at least two years of continued employment after the employee signs, or other consideration adequate to support the covenant: a period of employment plus additional professional or financial benefits, or benefits that are adequate by themselves.
The two-year rule catches employers out. An employee who resigns eighteen months after signing may not be bound at all unless something more was given. A signing payment, a bonus tied to the covenant, or garden-leave pay during the restricted period makes the agreement considerably easier to enforce.
The covenants we see fail are rarely unreasonable. They were signed on the first morning, unread.
How it must be signed
The employer must advise the employee in writing to consult an attorney before signing, and must give the employee at least fourteen calendar days to review the agreement. The employee may choose to sign sooner, but the fourteen days have to be genuinely offered. A covenant handed over with a stack of onboarding forms on the first day of work is an easy target.
What a court will look at
Even a covenant that meets every procedural rule must protect a legitimate business interest and be no broader than needed to protect it. The Act adopts the approach Illinois courts already took: the court looks at all the circumstances, including the employee’s exposure to customer relationships and confidential information, and the length, territory and scope of the restriction.
A one-year restriction on calling the customers an account manager actually served is a very different proposition from a two-year ban on working for any competitor anywhere in the country. Courts may rewrite an overbroad covenant rather than strike it, but they are not obliged to, and the Act treats extensive rewriting as disfavoured.
The cost of getting it wrong
If an employer sues to enforce a covenant and the employee prevails, the Act entitles the employee to recover costs and reasonable attorney’s fees. The Illinois Attorney General can also investigate employers that show a pattern of using unlawful covenants. A weak non-compete is not a free option: it can cost more to lose than it would ever have been worth to win.
What about the federal rule?
In 2024 the Federal Trade Commission issued a rule that would have banned most non-competes nationwide. A federal court set it aside before it took effect, and the Commission has since stopped defending it, saying it will pursue individual cases instead. For now, Illinois employers should plan around the state Act while watching for federal enforcement against particularly aggressive agreements.
What still holds
For most employers the practical answer is a layered set of protections rather than a single non-compete:
- A non-compete only for employees above the earnings floor who genuinely have access to customer relationships or confidential information.
- Narrow scope: a defined list of competitors or services, the territory the employee actually covered, and twelve months or less for most roles.
- Customer and employee non-solicitation covenants for a wider group, above their own lower floor.
- Confidentiality obligations and the protection of the Illinois Trade Secrets Act for everyone, whatever their pay.
- A signing process that offers fourteen days and written advice to consult a lawyer, with consideration beyond continued employment.
If your templates were drafted before 2022, review them now, before the 2027 thresholds arrive and before you need to rely on them.
