Effective January 1, 2017, the Illinois Freedom to Work Act (the “Act”) will prohibit private sector employers from entering into non-competition agreements with employees earning a “low wage.”  The Act defines low-wage employees as those who earn the greater of: (a) the federal ($7.25 per hour), state ($8.25 per hour), or local (currently, $10.50 per hour under the Chicago Minimum Wage Ordinance) minimum wage; or (b) $13.00 per hour.  The Act defines prohibited restrictions on competition as those that limit a low-wage employee from: (a) working for another employer for a specified period of time; (b) working in a specified geographical area; or (c) engaging in similar work for another employer.  Under the Act, these restrictions will be deemed “illegal and void.”  Notably, the Act does not affect an employer’s right to protect confidential information and trade secrets through confidentiality agreements with any worker, including low-wage employees.

The Act follows (i) a lawsuit brought by the Illinois Attorney General involving sandwich chain Jimmy John’s use of non-competition agreements to prevent low-wage earners from working at competitors (Jimmy John’s recently reached an agreement with the New York Attorney General to cease that practice); and (ii) a trend of cases around the country challenging the propriety of non-compete agreements with lower-level employees.

In light of the Act and uptick in scrutiny in this area, employers should revisit the application of their non-competition agreements to ensure that they apply to the appropriate employee population.

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Photo of Steven J. Pearlman Steven J. Pearlman

Steven J. Pearlman is a partner in the Labor & Employment Law Department and Co-Head of the Whistleblowing & Retaliation Group and the Restrictive Covenants, Trade Secrets & Unfair Competition Group.

Steven’s practice covers the full spectrum of employment law, with a particular…

Steven J. Pearlman is a partner in the Labor & Employment Law Department and Co-Head of the Whistleblowing & Retaliation Group and the Restrictive Covenants, Trade Secrets & Unfair Competition Group.

Steven’s practice covers the full spectrum of employment law, with a particular focus on defending companies against claims of employment discrimination, retaliation and harassment; whistleblower retaliation; restrictive covenant violations; theft of trade secrets; and wage-and-hour violations. He has successfully tried cases in multiple jurisdictions, and defended one of the largest Illinois-only class actions in the history of the U.S. District Court for the Northern District of Illinois. He also secured one of only a few ex parte seizures orders that have been issued under the Defend Trade Secrets Act, and obtained a world-wide injunction in federal litigation against a high-level executive who jumped ship to a competitor.

Reporting to boards of directors, their audit committees, CEOs and in-house counsel, Steven conducts sensitive investigations and has testified in federal court. His investigations have involved complaints of sexual harassment involving C-suite officers; systemic violations of employment laws and company policies; and fraud, compliance failures and unethical conduct.

Steven was recognized as Lawyer of the Year for Chicago Labor & Employment Litigation in the 2023 edition of The Best Lawyers in America. He is a Fellow of the College of Labor and Employment Lawyers.  Chambers describes Steven as an “outstanding lawyer” who is “very sharp and very responsive,” a “strong advocate,” and an “expert in his field.” Steven was 1 of 12 individuals selected by Compliance Week as a “Top Mind.” Earlier in his career, he was 1 of 5 U.S. lawyers selected by Law360 as a “Rising Star Under 40” in the area of employment law and 1 of “40 Illinois Attorneys Under Forty to Watch” selected by Law Bulletin Publishing Company. Steven is a Burton Award Winner (U.S. Library of Congress) for “Distinguished Legal Writing.”

Steven has served on Law360’s Employment Editorial Advisory Board and is a Contributor to Forbes.com. He has appeared on Bloomberg News (television and radio) and Yahoo! Finance, and is regularly quoted in leading publications such as The Wall Street Journal.

The U.S. Chamber of Commerce has engaged Steven to serve as lead counsel on amicus briefs to the U.S. Supreme Court and federal circuit courts of appeal. He was appointed to serve as a Special Assistant Attorney General for the State of Illinois in employment litigation matters. He has presented with the Solicitor of the DOL, the Acting Chair of the EEOC, an EEOC Commissioner, Legal Counsel to the EEOC and heads of the SEC, CFTC and OSHA whistleblower programs. He is also a member of the Sedona Conference, focusing on trade secret matters.