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What to do if Requested to Sign a Non-Compete Agreement
According to a recent survey by the Economic Policy Institute, an estimated 27% to 47% of private sector workers are subject to non-compete agreements. This means tens of millions of employees are bound by covenants not-to-compete and other restrictive covenants. Many are unaware they are subject to restrictive covenants or have never read the terms of those agreements.
Restrictive covenants seek to limit what an employee can do during his employment and after he leaves. The most common restrictive covenants that employees are asked to sign are non-disclosure agreements, non-compete agreements, and non-solicitation agreements. Non-compete provisions typically prohibit a former employee from working for a competitor for a period of time following the end of his employment. To be enforceable in Illinois, a non-compete agreement must be reasonably restricted in scope, geographic area, and duration. Additionally, the covenant not-to-compete must be supported by sufficient consideration.
Historically, employers used non-compete agreements to keep high-paid executives from leaving to work for a competitor or start a competing business and taking the company's secrets with them. More recently, there has been a movement to use such agreements with salespeople and others who work directly with customers to prevent these employees from taking their clients with them when they leave.
Increasingly, employers are requiring even low wage workers to sign these agreements. Recent settlements with high-profile employers such as Jimmy Johns and WeWork have highlighted this practice. Illinois and New York sued Jimmy John’s alleging that the sandwich chain required all employees, including sandwich makers and delivery drivers, to sign two-year non-competes. WeWork settled allegations in the same two states that it made all employees, even cleaners and baristas, sign broad non-compete agreements.
It is this use of non-compete agreements with low-wage or low-skill workers that state and federal legislatures have attempted to crack down on. As we have previously written about, a number of states—including Illinois, Washington, Oregon, Maine, New Hampshire, and Rhode Island—have recently passed laws prohibiting the use of non-compete agreements with low-wage employees. Similarly, the Senate is currently considering two bills that would ban the use of non-competes for low-wage workers.
Some economists argue that such agreements suppress wages, reduce mobility and are anti-competitive. Those opposed to the use of covenants not-to-compete characterize them as a retention device that employers use as a scare tactic to prevent workers from leaving to work for a competitor.
The odds are high that at some point you will be asked to sign a non-compete agreement. According to the Economic Policy Institute study, nearly half, 49.4%, of responding employers indicated that they required at least some of their employees to enter non-compete agreements. Almost a third, 31.8%, of responding businesses indicated that they required all employees to enter non-compete agreements, regardless of pay or job duties.
Sometimes the non-compete provision is in an offer letter, a separate agreement, a bonus agreement, severance agreement, or is contained in the company’s employee handbook. Before signing any agreement or acknowledging receipt of something, be sure to read and understand everything. If you don’t understand a provision, ask the employer to explain it or, if possible, take the agreement containing the restrictive covenant to an employment lawyer to review. You may be able to negotiate certain elements of the non-compete agreement such as the length of the post-employment restrictions or the definitions of the terms "competitor" or "customer" used in the agreement.
Whether you are a business owner who is, or is considering, asking employees to sign a non-compete agreement or an employee being asked to sign one, it is always advisable to seek the assistance of an attorney experienced in non-compete law. The Elmhurst and Oak Brook non-compete agreement attorneys at Lubin Austermuehle are among the best non-compete attorneys in the Chicagoland area with over thirty years of experience defending and prosecuting non-compete agreements and unpaid wages and a wide variety of other business dispute lawsuits. Lubin Austermuehle, a firm of Chicago business dispute attorneys, handles litigation for individuals and businesses of all sizes, including small or closely held businesses for whom competition from an ex-employee can be a serious threat.
Super Lawyers named Illinois commercial law trial attorney Peter Lubin a Super Lawyer and Illinois business dispute attorney Patrick Austermuehle a Rising Star in the Categories of Class Action, Business Litigation, and Consumer Rights Litigation. Lubin Austermuehle’s Illinois business trial lawyers have over three decades of experience litigating complex class-action, copyright, non-compete agreement, trademark, and libel suits. Our DuPage county business dispute and restrictive covenant lawyers also handle emergency non-compete litigation involving temporary restraining orders and preliminary injunctions. We also assist Chicago, Cook, and DuPage County area businesses and business owners who are victims of fraud. You can contact us by calling (630) 333-0333 or our toll-free number (833) 306-4933. You can also contact us online here.