Illinois Non-solicitation Agreements

Illinois Non-solicitation Agreements

Non-solicitation agreements are provisions in employment agreements which, in the event that the employee leaves the company, prohibit the employee for contacting valuable customers or employees. Non-solicitation agreements most commonly extend to employees, clients, and patients of the company. The goal is to make sure that in the event that the employee goes to work for a competitor, a company can stop the employee from soliciting its clients, customers, or employees.

Non-solicitation agreements are valuable if, because of the nature of the business, employees are able to leave their employer and start their own business with relatively little capital a company has the ability to limit the damage from that competition. If an employee can take a few key clients or employees and start a competing business, a business has a strong interest in protecting themselves from such harm. Non-solicitation agreements assist an employer to ensure that they are protecting the time, money, and goodwill they have created from being taken by a competing firm which has not invested the same amount of time and money to build their business. A non-solicitation agreement is a tool to prevent unfair methods of competition.

State law, not federal law, governs non-solicitation agreements. In Illinois, non-solicitation agreements are governed by the Illinois Freedom to Work Act (“IFWA”). Under the IFWA,  a “Covenant not to solicit” is defined as an agreement between an employer and an employee that (1) restricts the employee from soliciting for employment the employer’s employees or (2) restricts the employee from soliciting, for the purpose of selling products or services of any kind to, or from interfering with the employer’s relationships with, the employer’s clients, prospective clients, vendors, prospective vendors, suppliers, prospective suppliers, or other business relationships. (820 ILCS 90/5).

The IFWA places restrictions on who can be subject to a non-solicitation agreement. The Act prohibits an employer from “entering into a covenant not to solicit with any employee unless the employee’s actual or expected annualized rate of earnings exceeds $45,000 per year. This amount shall increase to $47,500 per year beginning on January 1, 2027, $50,000 per year beginning on January 1, 2032, and $52,500 per year beginning on January 1, 2037. A covenant not to solicit entered into in violation of this subsection is void and unenforceable.” (820 ILCS 90/10).

A covenant not to solicit is illegal and void unless (1) the employee receives adequate consideration, (2) the covenant is ancillary to a valid employment relationship, (3) the covenant is no greater than is required for the protection of a legitimate business interest of the employer, (4) the covenant does not impose undue hardship on the employee, and (5) the covenant is not injurious to the public.  (820 ILCS 90/15).

Unlike non-compete agreements, non-solicitation agreements are more likely to be enforced because they are not restraints on trade but merely restraints on who someone can contact.  So long as the restraint on who the employee can contact is reasonable, the courts will enforce the non-solicitation agreement. A reasonable agreement is one which is not broader than necessary to protect an employer’s legitimate business interest. The court will balance the employer’s legitimate business interest with the employees need to find work. If the restriction places an undue burden on the employee, it is likely not reasonable.

For assistance with a question relating to a non-solicitation agreement or other Illinois employment law issues, please contact the Law of Office Andrew Szocka, P.C. to speak with an attorney today.

 

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