Aggressive state action being taken over noncompete agreements
States have increasingly been enacting stricter laws to limit the use of restrictive covenants. The possibility of new laws limiting employer’s use of these agreements remains a hot-button issue for legislatures across the country and leaves employers in a state of uncertainty. One of the more recent entrants into this debate is Illinois.
The Illinois Freedom to Work Act went into effect on Jan. 1, 2017. The Illinois attorney general recently sued payday lender Check Into Cash alleging violations of the act. The Illinois attorney general claims the company “inappropriately tries to retain low-income workers by requiring them to sign unfair noncompete agreements that attempt to prevent workers from getting better jobs elsewhere.” Check Into Cash is one of the largest payday lenders in the country, with 33 locations in Illinois alone.
The Illinois Freedom to Work Act prohibits employers from requiring noncompete agreements for employees who do not earn the minimum wage or $13 per hour, whichever is greater. Check Into Cash allegedly requires noncompete agreements for all employees, including those who make less than $13 per hour. According to the lawsuit, Check Into Cash informs potential employees that refusing to sign a noncompete agreement is grounds to rescind an employment offer. Check Into Cash’s noncompete agreements apply to workers in all positions, including customer service representatives who make collection calls. The Illinois attorney general, like an increasing number of regulators across the country, has taken the position that these agreements are illegal.
This action against Check Into Cash comes on the heels of the Illinois attorney general’s recent settlement with Jimmy John’s, in which Jimmy John’s agreed to pay $100,000 to “raise public awareness” regarding the legal standards for noncompete agreements. The Illinois attorney general claimed that the sandwich company had required all employees, including sandwich-makers and delivery drivers, to sign a two-year noncompete agreement. Jimmy John’s maintains that it had stopped using the noncompete agreements prior to the attorney general’s lawsuit. Jimmy John’s entered into a separate, though similar, settlement with the New York attorney general also related to the use of noncompete agreements.
These lawsuits should serve as a caution to employers to be aware of the new and overlapping laws that may affect businesses in different states. In light of these new regulations and the heightened and state’s heightened interest in them, it is important to review your agreements to ensure that they are enforceable.
If you have questions about noncompete agreements, contact one of the attorneys below or another member of the trade secret, noncompete,and unfair competition team.