What Are Recent Developments In Illinois Non-Compete Law?

For decades, non-compete agreements have been a standard tool for Illinois businesses seeking to protect trade secrets, client relationships, and proprietary information. However, the legal landscape surrounding non-competes has changed dramatically in recent years, both at the federal and state levels.

The most notable shift came from the Federal Trade Commission (FTC), which attempted to impose a nationwide ban on non-compete clauses. Although that effort was halted by the courts, it signals an ongoing federal push to limit restrictive covenants in the workplace. At the same time, Illinois has continued to strengthen its own state-level restrictions, particularly under the Illinois Freedom to Work Act (820 ILCS 90/).

Business owners and executives must now navigate a complex and evolving legal framework when drafting or enforcing non-compete agreements. Whether you need help understanding the current state of non-compete laws at the state or federal level, our Naperville, IL business law attorney is here to help. 

What Was the FTC Trying to Do About Non-Compete Clauses?

In April 2024, the Federal Trade Commission finalized a rule that would have banned nearly all non-compete clauses nationwide. The FTC argued that such restrictions unfairly limit worker mobility, suppress wages, and stifle innovation. The rule would have prohibited employers from entering into, maintaining, or attempting to enforce non-compete clauses with nearly all employees and independent contractors.

The FTC rule contained a few narrow exceptions. For example, non-compete clauses could still be used in the sale of a business, allowing a buyer to prevent the seller from immediately opening a competing company. It also carved out an exception for certain senior executives earning more than $151,164 annually and holding policy-making positions.

The rule was set to take effect on September 4, 2024, but on August 20, 2024, a federal court in Texas blocked its enforcement. The court concluded that the FTC had exceeded its statutory authority under the Federal Trade Commission Act. As of October 2025, the FTC’s nationwide ban remains unenforceable. However, the Commission has signaled that it will continue appealing and exploring other regulatory avenues to curb non-competes, suggesting that federal scrutiny is far from over.

For Illinois employers, this means that non-competes remain legal, for now, but the environment is increasingly hostile to overly broad or unfair agreements.

How Does Illinois Regulate Non-Compete Agreements?

Even without federal intervention, Illinois has already implemented significant limitations on the use of non-compete and non-solicitation agreements. The Illinois Freedom to Work Act (IFTWA), as amended in 2022, prohibits employers from entering into non-compete agreements with employees who earn less than a certain amount per year.

That salary threshold will automatically increase by $5,000 every five years, reaching $80,000 in 2027 and continuing to rise thereafter. Similarly, non-solicitation agreements, which restrict employees from contacting clients or coworkers after leaving a company, are prohibited for employees earning less than $45,000 per year, with the same periodic adjustments.

Illinois law also includes several additional requirements and restrictions:

• Adequate Consideration: The agreement must provide the employee with adequate consideration, such as at least two years of continued employment or other tangible benefits.
• Reasonableness: Non-compete terms must be reasonable in time, geographic scope, and the type of activity restricted. Courts will not enforce an agreement that is broader than necessary to protect a legitimate business interest.
• Notice Requirement: Employers must provide employees with at least 14 calendar days’ notice before asking them to sign a non-compete or non-solicitation agreement. Employees must also be advised in writing to consult with an attorney before signing.
• Layoffs and Public Emergencies: The law prohibits employers from enforcing non-compete clauses against employees who are terminated or furloughed due to the COVID-19 pandemic or similar circumstances.

The Illinois Freedom to Work Act reflects a strong public policy favoring worker mobility, but it still allows employers to protect their legitimate business interests when agreements are narrowly tailored and fair.

How Do Courts in Illinois Decide Whether a Non-Compete Is Enforceable?

Illinois courts review non-compete agreements under a “totality of the circumstances” test. Judges consider whether the restriction is reasonable and necessary to protect the employer’s confidential information, trade secrets, or near-permanent customer relationships.

Courts typically look at four key factors:

Time Duration

A non-compete lasting six months to two years is generally considered reasonable, depending on the employee’s role and the industry.

Geographic Scope

Restrictions must be limited to the geographic area where the employee actually worked or where the employer does business.

Legitimate Business Interest

The employer must demonstrate that the agreement protects something more than general competition, such as proprietary client lists, specialized training, or goodwill.

Consideration

The employee must receive something of value in exchange for agreeing to the restriction, which cannot simply be continued employment for a short duration.

What Should Illinois Business Owners Do in Light of The Changes in Non-Compete Laws?

Although the FTC’s nationwide ban was blocked, Illinois employers should assume that the legal environment for non-competes will continue tightening. The combination of federal attention and state-level restrictions makes it essential for businesses to review all existing employment agreements on a regular basis with qualified counsel.

What Is the Future of Non-Compete Law?

While the FTC’s proposed rule remains blocked, the agency’s aggressive stance reflects a larger trend toward restricting employer control over post-employment activity. Several states already prohibit most non-compete clauses outright. Illinois has not gone that far, but its Freedom to Work Act and subsequent amendments signal a steady move in that direction.

High-net-worth business owners, executives, and closely held corporations should be proactive about these changes. Well-written employment and partnership agreements can still protect trade secrets, key relationships, and intellectual property, but they must be drafted with total precision. Business owners must remain attentive to both state updates and potential federal appeals that could reinstate parts of the FTC’s rule or introduce new nationwide restrictions in the coming years.

Call a Naperville, IL Business Lawyer for Non-Compete Agreement Guidance 

At Gierach Law Firm, we understand from personal experience the challenges business owners face when balancing growth, competition, and compliance. With decades of experience advising Illinois companies, our firm helps employers draft and enforce legally sound agreements that protect their investments while respecting changing state and federal law.If your company uses or is considering using non-compete agreements, now is the time for a full legal review. Contact Gierach Law Firm today at 630-756-1160 to schedule a consultation with an experienced Naperville business law attorney.