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January 4, 2017

Spurred in part by sandwich shop Jimmy John’s requirement that sandwich-makers and delivery drivers sign over-reaching non-compete agreements, the Act prohibits private sector employers from entering into non-compete restrictions with “low-wage employees” and renders such agreements “illegal and void.” The Act applies to non-compete agreements entered into on or after the Act’s effective date of January 1, 2017.

A “low-wage employee” is someone who earns the greater of (1) the hourly minimum wage under federal (currently, $7.25 per hour), state (currently, $8.25 per hour), or local law (currently, $10.50 per hour in Chicago) or (2) $13.00 per hour. Therefore, the Act initially will apply to agreements with employees earning $13.00 per hour or less.

The Act defines “covenant not to compete” broadly to mean an agreement between an employer and a low-wage employee that restricts the employee from performing:

(1) Any work for another employer for a specified period of time;
(2) Any work in a specified geographic area;
(3) Work for another employer that is similar to the low-wage employee’s work for the employer in question.