Does Your Business Need Non-Compete Agreements?

As a business owner, you will want to take steps to protect yourself against unfair competition. This may be a concern when employees leave your company, since they may go to work for a competitor or start their own business and use knowledge of your practices, customers, and trade secrets to gain an unfair advantage against you. To protect against this possibility, you may be able to use non-compete agreements in employment contracts, severance agreements, or other types of business contracts. However, you will need to understand how these types of agreements may be used, the types of restrictions they may include, and whether there are any limits that apply for certain types of employees.

Understanding Non-Compete Agreements

Generally, a non-compete agreement will restrict a person from working for certain companies, performing certain types of work, or contacting a business’s customers. These agreements can be beneficial when certain employees leave a company, including salespeople who have a knowledge of a business’s customers or executives, managers, or other staff members who have an understanding of a company’s operations or trade secrets.

To be valid and enforceable, the restrictions that non-compete agreements place on a person must be reasonable. They will usually need to be limited to a certain time period, and in most cases, they will last for one to two years. They will also need to be limited to certain geographical areas, such as the local market where a company operates or the region where a person had interacted with customers. Non-compete agreements should not place unreasonable restrictions on a person that would make it difficult or impossible for them to find gainful employment.

Limits on Non-Compete Agreement in Illinois

The state of Illinois has taken steps to limit the use of non-compete agreements for certain workers and ensure that low-income and blue-collar workers are protected from unreasonable restrictions. An update to the Illinois Freedom to Work Act that went into effect on January 1, 2022 has prohibited non-compete agreements for employees who earn less than $75,000 per year, as well as workers in the construction industry and those who are covered by collective bargaining agreements. 

The law also states that non-compete agreements may only be used if they are needed to protect a company’s legitimate business interests and if an employee is given adequate consideration. Consideration may include financial payments and benefits, such as a severance package provided in return for signing a severance agreement. If an employee worked for an employer for at least two years after signing a non-compete agreement, this will be considered adequate consideration. Employers must also advise employees to consult with an attorney before signing a non-compete agreement, and they must provide a person with at least 14 days to review an agreement before signing it.

Contact Our Naperville Non-Compete Agreement Attorney

If you are looking to protect the interests of your business and prevent unfair competition, the Gierach Law Firm can advise you of your rights and options for using non-compete agreements. We can help you understand what types of employees may be covered by these agreements and the steps you can take to make sure your agreements will be enforceable should the need arise. To get legal help with legal agreements that can protect your company, contact our DuPage County business contracts lawyer at 630-756-1160.

Sources:

Illinois General Assembly

Investopedia

Business News Daily