Current Status of Non-Competition Agreements in Illinois – Sept. 2024
Non-competition clauses are common in physician employment agreements. According to the U.S. Federal Trade Commission (FTC), a non-compete clause is “a contractual term between an employer and a worker that blocks the worker from working for a competing employer, or starting a competing business, typically within a certain geographic area and period of time after the worker’s employment ends.”
Illinois physician employment agreements may be affected by both state and federal law and rules. The ICS has published articles and videos that note a growing governmental disfavor for non-competition provisions. We reported in 2022 that the Illinois legislature passed a law restricting non-competition and non-solicitation clauses in employment agreements. To view the article, click here. [Note: The Illinois law applies to both non-competition and non-solicitation provisions; however, the FTC rule, court cases, and this article pertain only to non-competition provisions.]
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During 2024, non-compete agreements have been the subject of much regulatory and court activity, resulting in some confusion about current legal status and enforceability. The following is a summary of events to clarify the current status of non-compete provisions:
- May 7, 2024 – The FTC published a rule that would:
- Ban new non-compete agreements after the anticipated September 4, 2024, effective date;
- Void all existing non-compete agreements with employees who do not qualify as a “senior executive”; and
- Require employers to notify affected employees of the change before the anticipated September 4, 2024 effective date.
- May 7, 2024 – Ryan LLC (a tax preparation firm) and the U.S. Chamber of Commerce filed a complaint in Texas federal court to prevent the rule from going into effect, arguing that the FTC lacks authority to adopt such a substantive rule.
- August 20, 2024 – the federal court ordered that the FTC’s non-compete rule is unlawful and that the rule shall not take effect on September 4, 2024, or thereafter. This ruling applies to all employers and prevents the FTC from enforcing the rule against any company nationwide.
Therefore, the FTC Non-Compete Rule will not take effect on September 4 and relieves employers from sending notices voiding the non-competes that current and former employees have already signed. HOWEVER, the Illinois law is still in place; therefore, the restrictions in that law still apply to contracts entered in on or after January 1, 2022 (employers may only enter into non-compete agreements with employees earning $75,000 or more annually, including the value of employee retirement contributions, healthcare-related accounts, and other deductions and benefits).
The ICS encourages members to review the restrictions of the Illinois law, as detailed in its article here.
As always, the ICS will continue to monitor regulatory and court action and will inform members as to new developments.
