Illinois is considering expanding its non-compete restrictions by increasing its income thresholds, expanding the scope of covered restrictive covenants, and imposing new requirements for the covenants to be enforceable. The Biden administration supports imposing federal restrictions on such agreements.
Key aspects of HB 789 that are being considered:
- Income thresholds would be increased from $13.00 per hour (or minimum wage if that is higher) to “actual or expected” annual earnings exceeding $75,000 per year. That amount would increase to $80,000 in 2027, $85,000 in 2032, and $90,000 in 2037. For non-solicitation covenants, the threshold would start at $45,000.
- Garden leave: Non-competes would not be enforceable for employees terminated due to COVID-19 unless the employee received pay for the duration of the non-compete covenant period “minus compensation earned through subsequent employment during the period of enforcement.”
Background: Illinois was one of the first states to address concerns with non-compete agreements. The Obama administration called on states to exempt employees below a certain wage threshold. Illinois subsequently implemented the Illinois Freedom to Work Act, which HB 789 would modify.
Momentum increasing at the state and local level. In January 2021, the Washington, D.C. City Council passed a bill that effectively banned all non-compete agreements for any employees in the District. The Biden administration has indicated it is in favor of a nationwide ban on all but a few non-compete agreements.
Outlook: President Biden has made it clear he is not a fan of non-compete agreements, but such contracts are typically left to states to regulate. In February 2020, the Center On Executive Compensation submitted comments to the FTC on the necessity of non-competes for certain roles with companies. HR Policy and the Center will continue advocating for their responsible use going forward.
