IBA Compliance Connection

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Under Illinois’s new Freedom to Work Act, can we prohibit our current low-wage employees from maintaining a second job at a competing bank while they still are employed at our bank? We have some employees who hold second jobs, mostly in retail or food service, but we ask them to inform us of this so that we can determine if the other job violates our conflict of interest policy. On the surface, this law would seem to override our policy, at least for our employees under this wage cap, but that doesn’t make sense.

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It is unclear whether the new law prohibits employers from using covenants not to compete with low-wage employees when they are limited to the period of employment and do not apply to post-employment periods. We agree that the plain language of the law does not differentiate between employment and post-employment periods. On the other hand, covenants not to compete typically address post-employment situations, and an employer's restrictions on outside employment by current employees working additional jobs typically are not based on covenants not to compete.

The Illinois Freedom to Work Act, which became effective January 1, 2017, prohibits private employers from entering into covenants not to compete with low-wage employees. A “low-wage employee” is any employee who earns the greater of the minimum hourly wage under federal, state or local law, or $13.00 per hour. A “covenant not to compete” is an agreement that prohibits an employee from performing similar work for another employer. There is no exception for financial institutions or any other type of employer.

However, the Act does not prohibit employers from requiring their current employees, including low-wage employees, from entering into nondisclosure, confidentiality and non-solicitation agreements or being subject to such employment policies during a period of employment. We believe that such provisions in your employment agreements and employee policies, properly drafted with the assistance of counsel, should preserve your existing policy while avoiding violations of this new law. 

Also, note that the law does not invalidate any non-compete agreements that already were in place before January 1, 2017.

For resources related to our guidance, please see:

  • Illinois Freedom to Work Act, 820 ILCS 90/10 (“No employer shall enter into a covenant not to compete with any low-wage employee of the employer.”)
  • Illinois Freedom to Work Act, 820 ILCS 90/5 (“‘Covenant not to compete’ means an agreement: (1) between an employer and a low-wage employee that restricts such low-wage employee from performing . . . work for another employer that is similar to such low-wage employee's work for the employer included as a party to the agreement . . .”)

  • Illinois Freedom to Work Act, 820 ILCS 90/5 (“‘Low-wage employee’) means an employee who earns the greater of (1) the hourly rate equal to the minimum wage required by the applicable federal, State, or local minimum wage law or (2) $13.00 per hour.)

  • Illinois Freedom to Work Act, 820 ILCS 90/5 (“‘Covenant not to compete’ means an agreement: (1) between an employer and a low-wage employee that restricts such low-wage employee from performing . . . work for another employer that is similar to such low-wage employee's work for the employer included as a party to the agreement . . . (2) that is entered into after the effective date of this Act.”)