Business & Work

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Non-compete and non-solicitation agreements are used by employers to protect their interests when employees leave the job. They can be used only in certain circumstances.

Non-compete agreements

When an employee starts a new job, the employer may ask the employee to sign a non-compete agreement. This agreement is also called a “covenant not to compete” or a “restrictive covenant.” It is a contract between an employee and their employer that states the employee will not do similar work for a competitor of the employer for a certain period of time or in a certain location.

Non-compete agreements are a way that companies try to protect their information and relationships. Sometimes they are legal, but they have to be reasonable.

For example, a contract that prevents the employee from ever working in the same industry anywhere in the world is too restrictive. If that kind of non-compete agreement was challenged in court, a judge would likely call it unreasonable and not enforce it. However, a non-compete agreement for 2 years that restricts the employee from doing the same job in the same region as their current job is much more reasonable.

Non-solicitation agreements

A non-solicitation agreement, or “covenant not to solicit,” prevents an employee from reaching out ("soliciting") and trying to do business with the current employer’s:

• Current or prospective clients,
• Current or prospective customers,
• Current or prospective vendors,
• Current or prospective suppliers,
• Current employees to offer employment, or
• Other business relationships.

Restrictions on non-compete and non-solicitation agreements

Employers must advise an employee in writing to consult with a lawyer before agreeing to a non-compete or non-solicitation agreement. The employee must have at least 14 days to review the agreement. At any time, if an employee thinks such agreements are unreasonable, they should talk to a lawyer. To be valid, the employee must receive something of value in return, such as employment for at least 2 years after signing the agreement or other benefits. The agreement must not cause hardship on the employee.

The Illinois Freedom to Work Act puts other limits on these agreements.

• Non-compete agreements cannot be used if an employee earns less than $75,000 per year. (Note: this salary baseline increases in 2027 and in 5 year periods after that.)
• Non-solicitation agreements cannot be used if the employee earns less than $45,000 per year. (Note: this salary baseline increases in 2027 and in 5 year periods after that.)
• Some employees in unions or in construction can’t be required to sign a non-compete agreement.
• Employers usually cannot enforce these agreements if they lay off employees for business reasons related to the pandemic. To do this, the employer has to pay the employee their base salary for the non-compete or non-solicit period minus income they get from their new job.

Some employers have additional restrictions on non-compete agreements. For instance, nurse agencies cannot enter into such agreements with nurses and certified nurse aides if they are assigned to work at a health care facility for less than 2 years.

Leaving a job

You may be subject to non-competition or non-solicitation restrictions if you are leaving your current employer. This includes when you leave to start a new business or work for a competitor.

Before leaving a job, review your employment agreement, employee handbook, and other agreements that you may have with your employer.

Consult with an employment attorney before starting a competing business or working for a competitor. An employment attorney will be helpful if you plan to contact your current employer's customers or employees.