Levin Ginsburg previously updated our clients on the proposed changes to Illinois non-compete and non-solicitation law (See March 30, 2021 blog here). That legislation passed on May 31, 2021, was signed into law August 13, 2021, and takes effect January 1, 2022. The new law is not retroactive, so it will not impact any agreement entered into before the new year.
Employers must understand this new law and how it will impact their restrictive covenant agreements with employees. The key requirements are as follows:
- Employers may not enter into non-compete agreements with any employee earning $75,000 or less per year. This salary threshold is scheduled to increase by $5,000 every 5 years through 2037.
- Employers may not enter into non-solicitation agreements with any employee earning $45,000 or less per year. This salary threshold is scheduled to increase by $2,500 every 5 years through 2037.
- Every restrictive covenant must include a notice for the employee to consult with counsel, which must be given to an employee 14-days before the restrictive covenant is executed.
- The new law codifies legal precedent that requires an employee to work at least 2 years before continued employment would be considered sufficient consideration for the agreement. As a result, employers will be required to provide some professional or financial benefit in exchange for signing any agreement in order for the agreement to be deemed enforceable at the time of execution.
- A restrictive covenant will be unenforceable if the employee was terminated or furloughed due to the COVID-19 pandemic or under similar circumstances (yet to be defined).
- The law does not allow a court to entirely rewrite a restrictive covenant, but gives the court broad discretion to modify or delete provisions of a covenant rather than hold the entire covenant unenforceable.
- Finally, the new law will require employers to pay an employee’s attorneys’ fees if the restrictive covenant is deemed unenforceable.
These changes will have a significant impact on an employer’s decision to require its employees to sign non-compete and non-solicitation agreements. Employers should begin working with their employment counsel now — well before the new law’s effective date of January 1, 2022 — to ensure their agreements are enforceable and avoid the risk of litigation and liability for an employee’s attorneys’ fees.
For assistance in drafting enforceable restrictive covenants and protecting your business, reach out to Walker R. Lawrence (email@example.com), a partner in Levin Ginsburg’s employment law practice, or Joseph A. LaPlaca (firstname.lastname@example.org), an associate attorney at Levin Ginsburg.
Oftentimes, private arbitration is the preferred method of resolving commercial disputes, including disputes with employees and customers. Because arbitration is a creature of contract—i.e., only parties that agree to resolve disputes by arbitration are required to do so—determining whether to include an arbitration clause in a contract requires careful consideration during the negotiation of a transaction. Including an arbitration agreement in your contract is generally advantageous because:
- The arbitrators are usually selected from a finite list of individuals, usually for their special expertise in a particular area.
- Relaxed rules of pleading, discovery, and evidence generally make it easier, less time-consuming, and thus less expensive to present your case.
- An arbitration can be scheduled, conducted, and concluded more quickly and conveniently than in court.
- An arbitration can be privately held, without public scrutiny, and transcripts of sworn testimony or other proceedings are not made public except by agreement.
- For defendants, there is usually less chance of a “runaway verdict” because a jury does not decide the case.
- The arbitrator generally will focus on the merits of the case and will make a decision based upon a fair view of the totality of the evidence submitted, which means there is less chance of a harsh result based on a technicality or procedural fluke.
Because both sides theoretically can agree to arbitration at any time during the dispute, even after a lawsuit has been filed by one of the parties, what is the advantage to having an arbitration clause in your contract? The real advantage to having an agreement to arbitrate disputes prior to the time the disputes actually arise is the ability to force the other side to arbitration even if they do not want to go, or to force them to abide by a particular procedural rule. Before you put that arbitration clause in the contract, however, you have to make a judgment call as to whether it is more likely than not that you will want to arbitrate, or force the other side to accept any particular rules or procedures for the arbitration. Even if you draft an airtight arbitration agreement or procedural rule, you should first think through what the ramifications would be if, when a dispute actually arises, you were to find yourself on the wrong end of your own arbitration clause. Arbitration clauses in commercial contracts should not simply be boilerplate, but rather, should be tailored to your business, industry, or particular transaction. Because many factors go into your decision to include an arbitration clause in your standard or specially negotiated contract, it is vital that you consult with an attorney who understands your business and the nature of possible disputes that may arise.
For more information regarding arbitrating commercial disputes and tailoring an arbitration clause to best meet your needs, please contact Howard L. Teplinsky at email@example.com or (312) 368-0100.
California is Serious About Privacy – Does Your Business Have a Roadmap to Comply with California Law?
By now, many companies who do business with California residents are familiar with the California Consumer Privacy Act of 2018 (“CCPA”), which became effective on January 1, 2020. The CCPA is one of the most comprehensive privacy laws in the country. Despite some familiarity with its requirements, compliance with the CCPA brought many challenges for business owners and their management teams. Violations of the CCPA can be extremely costly — up to $7,500.00 per intentional violation and $2,500.00 per unintentional violation.
Under the CCPA, businesses that collect personal data from any California resident must meet several obligations:
(1) posting a Privacy Notice on the business’s website;
(2) providing account verification;
(3) to not sell personal data pertaining to children;
(4) providing timely responses to residents’ requests that the business delete their personal information or provide residents with information concerning what personal information the business has collected relating to that resident; and
(5) providing timely responses to residents’ requests that the business not sell the resident’s personal data.
Shortly after the CCPA’s effective date, the California legislature passed the California Privacy Rights Act (“CPRA”) on November 3, 2020. The CPRA will become effective January 1, 2023 and will apply to all personal data collected by a business on or after January 1, 2022, with certain exceptions.
Among other things, the CPRA added obligations to the CCPA pertaining to:
(1) Sensitive personal information;
(2) Automated decision-making;
(3) Consumer profiling; and
(4) The formation of the California Privacy Protection Agency.
As if compliance with the CCPA and CPRA are not enough to pose significant challenges for businesses who serve California residents, numerous other California laws pertain to privacy and data security, such as the California Data Breach Law, the California Online Privacy Protection Act, the Shine the Light Law, and the California Invasion of Privacy Act.
If you are a business owner who does business with California residents and need assistance navigating the expansive and ever-changing legal landscape of privacy law, please contact Natalie A. Remien at firstname.lastname@example.org or (312) 368-0100.
On March 23, 2021 Governor Pritzker signed into law Senate Bill 1480 which makes several meaningful changes to the Illinois Human Rights Act (“IHRA”). One significant change under the new law is that employers may not use criminal records when making employment decisions unless they consider specific factors and take certain steps before making a final employment decision. The law goes into effect immediately.
Employment Decisions Based on a Conviction Record Violate the IHRA
It is now a violation of the IHRA to “use a conviction record” as a basis for any employment-related decision, unless the employer can establish either:
- there is a “substantial relationship” between the criminal conviction and the employee’s job; or
- hiring or retaining the employee would create an “unreasonable risk” to a specific individual or the public.
To determine whether an “unreasonable risk” exists, employers must consider “whether the employment position offers the opportunity for the same or a similar offense to occur and whether the circumstances leading to the conduct for which the person was convicted will recur in the employment position.” Accordingly, in evaluating whether an “unreasonable risk” exists, employers must evaluate the following six factors:
- the length of time since the conviction;
- the number of convictions that appear on the conviction record;
- the nature and severity of the conviction and its relationship to the safety and security of others;
- The facts or circumstances surrounding the conviction;
- the age of the employee at the time of the conviction; and
- evidence of rehabilitation efforts.
If an employer determines that one of the two exceptions applies, the employer must engage in an interactive process with the employee or applicant. The employer is required to notify the employee or applicant in writing of its preliminary decision that the employee’s conviction record disqualifies the employee. This notice must include:
- notice of the conviction or convictions that are the basis for the preliminary decision and the employer’s reasoning for the disqualification;
- a copy of the conviction history report, if any; and
- an explanation of the employee’s right to respond to the employer’s preliminary decision before it becomes final. This explanation must inform the employee that the response may include “submission of evidence challenging the accuracy of the conviction record that is the basis for the disqualification, or evidence in mitigation, such as rehabilitation.”
Upon receipt of the employer’s notice, the employee has up to five business days to provide a response before the employer makes a final determination.
Written Final Decision
Before making a final decision, the employer must consider any information submitted by the employee. If the employer determines that the employee or applicant is disqualified “solely or in part because of the employee’s conviction record,” the employer must provide another written notice to the employee. The second notice must include the following:
- notice of the conviction or conviction(s) that are the basis for the final decision and the reasoning for the disqualification;
- any existing procedures available to the employee to challenge the decision or request a reconsideration; and
- a statement that the employee has the right to file a charge with the Illinois Human Rights Department.
Illinois employers should reconsider how they will use criminal background checks in the future. While the law does not prohibit an employer from obtaining criminal background checks, it places a significant burden on employers if they want to use this information to make employment-related decisions.
Given the burdensome notice obligations, it may be more practical for employers to forego the use of criminal background checks altogether, unless there is a particularly compelling business reason for doing so. Due to the complexities of this decision, employers should discuss this matter with their employment lawyer. If an employer intends to continue using criminal background checks, it will need to implement appropriate procedures and policies to ensure compliance with the new law.
For additional help navigating these issues, feel free to contact Walker R. Lawrence, a partner in the employment law practice at Levin Ginsburg, at email@example.com, or Joseph A. LaPlaca, an associate attorney at Levin Ginsburg, at firstname.lastname@example.org.
As the COVID-19 vaccines are currently being distributed, employers must address various issues relating to the transition of employees back to the office. Below is a quick general guide concerning what employers can and cannot ask their employees concerning COVID-19:
Can an employer take an employee’s temperature?
Yes. Generally, measuring body temperature is a medical examination. Because the CDC and state/local health authorities have acknowledged community spread of COVID-19 and issued attendant precautions, employers may measure employees’ body temperature.
Can an employer ask an employee if they have had COVID-19?
Yes. Employers may ask all employees who will be physically entering the workplace if they have had COVID-19 or symptoms associated with COVID-19, as well as ask if they have been tested for COVID-19.
Can an employer ask an employee if they are having COVID-19 symptoms?
Yes. During a pandemic, ADA-covered employers may ask employees if they are experiencing symptoms of the pandemic virus.
Can an employer send an employee home during the COVID-19 pandemic if they have COVID or symptoms associated with it?
Yes. The CDC states that employees who become ill with symptoms of COVID-19 should leave the workplace. The ADA does not interfere with employers following this advice.
Can an employer ask an employee if any member of their household has had COVID symptoms or has tested positive?
No. The Genetic Information Nondiscrimination Act (GINA) prohibits employers from asking employees medical questions about family members. GINA, however, does not prohibit an employer from asking employees whether they have had contact with anyone diagnosed with COVID-19 or who may have symptoms associated with the disease.
Can an employer require employees to have a COVID-19 test?
The ADA requires that any mandatory medical test of employees be job related and consistent with business necessity. Applying this standard to the current circumstances of the COVID-19 pandemic, employers may take screening steps to determine if employees entering the workplace have COVID-19, because an individual with the virus will pose a direct threat to the health of others. Therefore, an employer may choose to administer COVID-19 testing to employees before initially permitting them to enter the workplace and/or periodically to determine if their presence in the workplace poses a direct threat to others.
Can an employer require employees to notify the employer if they test positive with COVID-19?
Can an employer require employees to adopt infection-control practices?
Yes. Regular hand washing, cough/sneeze etiquette and proper tissue usage and disposal may be required.
Can an employer require employees to wear PPE (masks, gowns, etc.) designed to reduce the spread of COVID-19?
Yes. An employer may require returning workers to wear personal protective gear and observe infection control practices.
Can an employer ask an employee if he or she has been vaccinated?
Yes. Simply requesting proof of receipt of a COVID-19 vaccination is not likely to elicit information about a disability and, therefore, is not a prohibited disability-related inquiry.
Can an employer require employees to have a vaccine?
Yes. Employers are permitted to encourage and even require vaccination before allowing employees to return to work. However, mandatory vaccination policies will require careful planning, training, and transparency to implement effectively and minimize risks.
Can an employer exclude employees from the workplace if they have not had a vaccine?
Yes, but only after doing an individualized assessment to determine if an employee poses a direct threat and concluding there is no other possible accommodation.
If an employer is currently complying with the Health Insurance Portability and Accountability Act (“HIPAA”), then it is already prepared to deal with the collection, storage, and disposal of an employee’s Personal Health Information (“PHI”) collected as a result of COVID-19. However, the Occupational Safety and Health Administration’s (“OSHA”) most recent guidance on controlling COVID-19 encourages all employers, including non-health-related companies, to put a COVID-19 prevention program into practice. OSHA encourages record-keeping as part of such a program. Thus, the days of avoiding the storage of health-related data to potentially avoid record-keeping activities are seemingly over. Certainly, employers in California must comply with California’s OSHA’s requirements concerning COVID-19. The following table provides guidance for those employers who are not already HIPAA-compliant.
Can an employer store medical information it collects from employees related to COVID-19?
Yes. The ADA requires that all medical information about a particular employee be stored separately from the employee’s personnel file, thus limiting access to this confidential information.
Can an employer disclose the name of an employee to other employees when it learns that the employee has COVID-19?
No. The employer should not disclose the name of the employee who has COVID-19. However, the CDC stated: If an employee is confirmed to have COVID-19, employers should inform fellow employees of their possible exposure to COVID-19 in the workplace but maintain confidentiality as required by the ADA.
Can an employer keep a log of daily temperature checks before entering the workplace?
Yes, provided that the employer maintains the confidentiality of this information.
Can an employer keep records of employees who have tested positive for COVID-19?
Yes, if confidentiality is kept. Employers should make every effort to limit the number of people who get to know the name of the employee.
Can the employer notify other employees that an employee has tested positive for COVID-19?
Yes. The ADA does not interfere with a designated representative of the employer interviewing the employee to get a list of people with whom the employee possibly had contact through the workplace, so that the employer can then take action to notify those who may have come into contact with the employee, without revealing the employee’s identity.
For almost a year since the onset of COVID-19, employers have been collecting and using data to track and trace the spread of the virus. Employers must be vigilant when collecting and utilizing data for tracking and tracing the spread of the virus and understand the risks of unauthorized disclosure or other potential abuses of the data.
Data Privacy and Security
Employers must develop policies and procedures to collect, use, and analyze PHI that are in compliance with relevant privacy laws. PHI, such as information that an employee has tested positive or is having symptoms of COVID-19, must be stored separately from regular personnel files and kept confidential. If this information is stored electronically, it must be stored in a manner which limits access to the information.
Employers should consider creating a COVID-19 task force that is responsible for handing all COVID-19 related issues within the company. This will necessarily limit the number of people who have sensitive COVID-19 information about employees.
It is important that employers discuss these issues with their data privacy attorney. A data privacy attorney can help employers comply with the patchwork of federal and state privacy regulations, including GDPR and HIPAA, and develop systems for the storage and use of employee PHI.
This article is intended to provide generalized guidance for employers and may or may not apply to your exact situation. If you require specific legal advice on these or related topics, or compliance with data privacy regulation that may affect your business, please contact Natalie A. Remien, a partner in the data privacy practice at Levin Ginsburg at email@example.com or Walker R. Lawrence, a partner in the employment law practice at Levin Ginsburg at firstname.lastname@example.org.
Restrictive covenants are contractual terms that restrict an employee’s ability to work for a competitor. Historically, these covenants were often used to prohibit high-level executives or employees with proprietary knowledge from working directly for a competitor. Today, restrictive covenants are increasingly used for even lower-level employees.
Examples of restrictive covenants are: “employee may not compete directly or indirectly with employer for a period of two (2) years after leaving the company,” or “employee may not do business within a 50-mile radius of the business after employment termination.” Under Illinois law, a restrictive covenant must be:
1. necessary to protect a legitimate business interest;
2. limited in terms of duration, geographic scope, and prohibited activity;
3. supported by sufficient consideration; and
4. ancillary to a valid employment agreement or sale of a business.
In 2016, the Illinois Freedom to Work Act (“IFWA”) was passed, which prohibited employers from implementing restrictive covenants for low-wage employees. IFWA defines low-wage employees as “an employee whose earnings do not exceed 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.”
On January 8, 2021, the Illinois legislature introduced Senate Bill 672 (“Bill 672”), which seeks to expand the scope of IWFA as follows:
1. covenants not to compete are neither valid nor enforceable unless the employee’s actual or expected yearly earnings exceed $75,000. Every 5 years, the yearly earnings figure will increase by $5,000;
2. covenants not to solicit are neither valid nor enforceable unless the employee’s expected yearly earnings exceed $45,000. Every 5 years, the yearly earnings figure will increase by $2,500;
3. covenants not to compete are neither valid nor enforceable if the employee subject to the covenant was terminated or furloughed due to the COVID-19 pandemic. Additionally, covenants not to compete are neither valid nor enforceable if the employee is terminated or furloughed under circumstances that are similar to the COVID-19 pandemic (such “circumstances” are not defined by Bill 672) unless enforcement of the covenant includes the payment of the employee’s base salary for the period of enforcement of the covenant, minus compensation received by the employee through subsequent employment; and
4. the employer must advise its employees in writing to consult with an attorney before agreeing to a non-compete or non-solicitation clause. Additionally, the employer must supply a copy of the clause at least 14 days before execution for the employee’s review.
Furthermore, the legislature also established five components necessary for a valid restrictive covenant. A restrictive covenant is void unless:
1. the employee receives adequate consideration;
2. the covenant is ancillary to a valid employment relationship;
3. the covenant is no greater than is required to protect the legitimate business interest of the employer;
4. the covenant does not impose an undue hardship on the employee; and
5. the covenant is not injurious to the public.
If an employer seeks to enforce a restrictive covenant and fails to succeed because the covenant is deemed unenforceable, Bill 672 would require the employer to pay the employee’s reasonable attorneys’ fees and costs. Significantly, Bill 672 does not apply retroactively.
It is expected that Bill 672 will pass in some form and would go into effect on June 1, 2021. Employers should consider whether they want to implement restrictive covenants in some form prior to Bill 672 being enacted into law, as those covenants will be grandfathered in.
For additional help navigating these issues, feel free to contact Roenan Patt, an attorney in the employment and business law practice at Levin Ginsburg, at email@example.com or Joseph A. LaPlaca, an attorney at Levin Ginsburg, at firstname.lastname@example.org.
The distribution of the COVID-19 vaccine is now underway and will become more widely available to the public. Employers are permitted to encourage and even require vaccination before allowing employees to return to work. However, mandatory vaccination policies will require careful planning, training, and transparency to implement effectively and minimize risks.
The Equal Employment Opportunity Commission (EEOC) released new COVID-19 vaccination guidelines providing that an employer may require employees get vaccinated and may administer the vaccine themselves or through a third-party.
Here are some key takeaways from the EEOC’s guidance:
- The CDC strongly recommends that anyone receiving a COVID vaccine answer pre-screening questions. If an employer asks the recommended questions, it is possible the employee’s answers will create obligations under the Americans with Disabilities Act (ADA). For example, the questions may require the employee to disclose any pre-existing medical conditions that may be relevant to administering the vaccine.
- If an employer or its third-party vendor administers the vaccine to employees, any pre-screening questions the employer asks before administering the vaccine must be “job-related and consistent with business necessity.”
- According to the EEOC, to meet this standard, “an employer would need to have a reasonable belief, based on objective evidence, that an employee who does not answer the questions and, therefore, does not receive a vaccination, will pose a direct threat to the health or safety of her or himself or others.”
- An employer can avoid issues that arise from asking pre-screening questions in one of two ways: (1) making the receipt of the vaccine voluntary and giving the employee a choice not to answer the pre-screening questions, or (2) requiring employees to be vaccinated by an unaffiliated third-party (e.g. Walgreens or CVS).
- Employers can require employees to provide proof of receiving a vaccine.
- Employers must consider possible accommodations for employees with disabilities and “sincerely” held religious beliefs.
- If an employer determines that an employee poses a direct threat, the employer must make an individualized assessment to determine if an employee poses a direct threat, considering (1) the duration of the risk; (2) the nature and severity of the potential harm; (3) the likelihood that the potential harm will occur; and (4) the imminence of the potential harm. A direct threat would generally mean an unvaccinated individual “will expose others to the virus at the worksite.”
- Even after determining an individual poses a direct threat, an employer still may not exclude the employee from the workplace (or take any other adverse employment action) unless there is no possible reasonable accommodation “that would eliminate or reduce this risk, so the unvaccinated employee does not pose a direct threat.”
Before deciding whether a mandatory vaccine against Covid-19 is the best choice for your business, it is important to consider the potential risks and discuss them with employment counsel.
Levin Ginsburg is here to help answer any questions you may have about mandated vaccinations or any other employment-related matters. To discuss, please contact Walker R. Lawrence, a partner in the employment law practice at Levin Ginsburg, at email@example.com, or Joseph A. LaPlaca, an attorney at Levin Ginsburg, at firstname.lastname@example.org.
As a result of recent amendments to the Illinois Human Rights Act (IHRA), employers in Illinois are required to provide annual sexual harassment training to employees who (1) work in Illinois, (2) may perform work in Illinois, or (3) regularly interact with Illinois employees. Employers have largely ignored these new requirements in the wake of the ever-changing environment created by COVID-19, but there is still time to comply. The training must occur on or before December 31, 2020. To help our clients comply with the law, Levin Ginsburg has been providing updated sexual harassment training to its clients virtually.
The Illinois Department of Human Rights provided a model PowerPoint program that employers can use to comply with the law. However, many employers prefer to offer their own training tailored to their business and policies. The law allows employers to use their own training, provided it meets or exceeds the statutory standards. At a minimum, the training must include:
• an explanation of sexual harassment consistent with the IHRA;
• examples of conduct that constitutes unlawful sexual harassment;
• a summary of relevant federal and state statutory provisions concerning sexual harassment, including remedies available to victims of sexual harassment; and
• a summary of responsibilities of employers in the prevention, investigation, and corrective measures of sexual harassment.
If your business is a restaurant or bar, the statute provides additional requirements, including providing each employee a written sexual harassment policy. Illinois recently issued a model training program for restaurants and bars, and this additional training must include the following additional topics:
• specific conduct, activities, or videos related to the restaurant or bar industry;
• an explanation of manager liability and responsibility under the law; and
• English and Spanish language options.
As the December 31, 2020 deadline is quickly approaching, it is important for employers to take steps to meet their obligations imposed by Illinois law. If you have questions about how Levin Ginsburg can help you conduct this training virtually for your employees, please reach out to
312-368-0100 or email@example.com.
You and your employees may become victims of unemployment fraud. The past several weeks have seen a huge increase in unemployment fraud in the State of Illinois and elsewhere. Much of the fraudulent activity arises out of the federal government’s implementation of the Pandemic Unemployment Assistance Program (“PUA”) in May of 2020. Since the launch of the PUA Program, over 107,000 fraudulent unemployment claims have been filed on behalf of unknowing victims, many in the State of Illinois.
Here’s how the scam has been operating:
A victim of the scam in Illinois will receive a letter from the Illinois Department of Employment Security (“IDES”) confirming that the recipient’s unemployment benefits have been approved. The problem, however, is that the individual has not applied for unemployment. The letter will either enclose a debit card that deposits funds into a fraudulent account when used or will advise the recipient that funds are being direct deposited into a bank account in that person’s name. The account, however, was set up by the scammers, who then siphon the ill-gotten gains from the bogus bank account. The IDES is advising recipients not to activate and, instead, destroy the debit card. Additionally, if the individual receives such a notice and that the recipient of the notice did not apply for unemployment benefits, the following important steps need to be taken immediately. The individual should:
- Contact IDES at the telephone number listed on the notice. Due to increased volume, IDES will likely take days or even weeks to return the call. The victim can also go to the IDES website (see the link below) and complete a contact form.
- Contact one of the three credit agencies (Experian, Equifax or Transunion) through their websites and report the fraudulent activity.
- Call the local police and file a police report.
- Tell the employer identified on the notice as the “last employer” that they will likely be receiving a Notice from IDES that the victim has applied for unemployment benefits.
- Notify the Federal Trade Commission at www.ftc.gov to report the identity theft.
- If they don’t already have one, obtain a pin from the IRS. This will ensure no one can file a fraudulent tax return on the victim’s behalf. Remember, the fraudster has the victim’s social security number.
The victim needs to make sure that he or she has kept a good paper trail of all of the steps taken. If you or one of your employees believes they’re a victim of unemployment fraud, they may also consult the following website:
If you have any questions, please contact your Levin Ginsburg attorney.
An often overlooked contract provision has now gained the spotlight in the wake of the COVID-19 pandemic. Parties to a contract are now considering whether a contractual force majeure (French for “superior force”) clause will play a critical role in determining whether or not performance is still required. Force majeure provisions typically consist of boilerplate language that generally excuse performance for “acts of God or other unforeseen circumstances that make performance impossible” but may also contain specific language identifying several events that could constitute a force majeure such as “acts of government,” “war,” “famine,” “hurricanes,” or “acts of terrorism.” Depending on the jurisdiction, not all force majeure provisions are created equal.
In order for force majeure to be applicable to a contract under Illinois law, the agreement must explicitly contain such a provision. If no provision exists, force majeure cannot be utilized as an excuse for non-performance. If a contract has a force majeure clause, depending on the jurisdiction, the party seeking to invoke the clause must typically demonstrate that the force majeure event was one of the events contemplated by the language of the provision, the event was unforeseeable at the time of contract, and that the event materially impacted, or rendered impossible, performance. Additionally, the affected party may be required to make a bona fide effort to perform under the contract and in doing so demonstrating that performance is impossible. Finally, if the force majeure clause contains a notice provision, it must be strictly complied with.
Even if a force majeure provision does not cover the COVID-19 pandemic, the parties to the contract may also have to contend with excused performance under Article 2 of the Uniform Commercial Code (for the sale of goods) or the common law doctrines of impossibility of performance or commercial frustration. Article 2 of the UCC codifies a form of force majeure for performance that has been made impracticable “by the occurrence of a contingency the non-occurrence of which was a basic assumption on which the contract was made or by compliance in good faith with any applicable foreign or domestic governmental regulation or order.” Alternatively, the common law doctrines of impossibility of performance or commercial frustration require a fact intensive analysis. However, the commonality of both doctrines is a need for an unforeseeable event such as COVID-19.
If you have questions regarding how the COVID-19 crisis may impact contractual performance, please contact either:
Howard L. Teplinsky at: firstname.lastname@example.org or (312) 330-6472
Roenan Patt at: email@example.com or (312) 368-0100
or any of Levin Ginsburg’s business attorneys.