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 (firstname.lastname@example.org), a partner in Levin Ginsburg’s employment law practice, or Joseph A. LaPlaca (email@example.com), an associate attorney at Levin Ginsburg.
On November 26, 2019 the Chicago City Council amended its Minimum Wage Ordinance to accelerate its $15/hour minimum wage hike four years ahead of schedule. Instead of tying the increases to CPI in 2020, the amendment will increase the minimum wage to $14/ hour on July 1, 2020 and to $15/hour July 1, 2021.
The update also increases the minimum wage for tipped workers to $8.40 an hour on July 1, 2020 and requires that it be set to 60% of the City of Chicago minimum wage going forward. On July 1, 2021 it will increase to $9 per hour. Employers can still use a tip credit to make up the difference, but employers will be required to true up any payments if the tip credit is not enough to cover for all hours worked, including overtime pay.
These changes will not immediately impact small businesses with less than 20 employees. Small businesses will only be required to increase the minimum wage to $13.50/hour on July 1, 2020 and $0.50 per year until it reaches $15 per hour in 2023. Employers will less than four employees are not covered by the minimum wage ordinance.
Finally, the City of Chicago’s changes will also eliminate the youth minimum wage exemption by 2025 and will increase the youth minimum wage to $10 per hour on July 1, 2020 until it reaches $15 per hour by 2024.
A breakdown of the relevant wage rates is below:
These changes are in addition to the update to the Illinois Minimum Wage Law that was enacted early this year in February. We provided a comprehensive updated on those changes in April, and you can read more about that here. Please contact us if you need any assistance complying with the Illinois or Federal Minimum wage and overtime laws at 312-368-0100 or Walker R. Lawrence at firstname.lastname@example.org
The Illinois Appellate Court has reiterated what the Illinois Supreme Court said a few years ago: Employees of a corporation owe a duty of loyalty to the company by which they are employed. And that it is a breach of their fiduciary obligation to appropriate for their own gain an opportunity that rightfully belongs to the company. Advantage Marketing Group, Inc. v. Keane, 2019 IL App (1st) 181126.
In this instance it was clear that the employee was far more than an ordinary employee and that it was not clear whether the company had considered the opportunity but had decided to take a pass on it.
Keane was one of the founders of Advantage Marketing Group (AMG) and, even at the time of his purported misconduct, owned 35% of AMG’s stock. He had served AMG as an officer and director, but was simply an employee when he seized a potential corporate opportunity and made good use of it through another corporation, Keane, Inc. d/b/a The Mail House.
In addition to owning 35% of AMG, Keane performed or had performed the following for AMG:
- Hired and fired employees
- Had access to all of AMG’s books and records including client lists, employee records, tax documents, vendor information and billing data
- Had a bonus equal to AMG’s majority stockholder
- Had developed and maintained AMG’s financial records
- Had explored potential strategic acquisitions in the letter-shop business
In the summer of 2013 Keane and AMG’s majority stockholder, Patty Herman, discussed the potential acquisition of The Mail House, a competitor of AMG.
Keane resigned from AMG on September 4, 2015. Prior to his resignation he began making preparations for the acquisition of The Mail House. He organized a new corporation named Keane, Inc. d/b/a The Mail House. He told AMG’s clients and vendors AMG was in financial distress, and solicited his son, an AMG employee, to join him at the new corporation. He also obtained samples of confidential client information and delayed in returning them after being demanded to do so by AMG’s counsel. He registered an internet domain name “mailhousedm.com”. After Keane left AMG, The Mail House was in direct competition with AMG.
AMG sued Keane charging breach of fiduciary duty and improperly appropriating a potential business opportunity (the acquisition of The Mail House) for himself.
Keane defended saying that as an employee he had no fiduciary duty to AMG and, furthermore, that he had discussed the potential acquisition with AMG’s majority stockholder but AMG had not moved forward with it. The court ruled against Keane on both points.
The court said that it was settled Illinois law that an employee owes a duty of loyalty to his employer and prohibits an employee from taking advantage of a business opportunity that belongs to his employer, while still employed.
The court did say that an employee may plan, form and outfit a competing company while still working for his employer. But that was as far as he can go. He cannot commence competing with his employer.
What’s the point? This was an easy decision for the court especially in view of the fact that Keane remained a 35% stockholder in AMG. But the critical point was that an employee must be loyal to his employer while employed and not seize opportunities that would normally flow to his employer. He can make preparations to leave, but cannot actively compete before doing so.
For more information and to raise any questions, please contact any of our business attorneys.
An Employer Can Be Liable for Accessing an Employee’s Personal Email Even if the Employee Engaged in Misconduct
Over the last several years, communication via email and text has become commonplace in the workplace. Oftentimes, employees use one device for both personal and work-related communication regardless of whether that device is employee-owned or employer-provided. There is no doubt that employers may have legitimate business reasons for monitoring employee communications. For example, an employee may leave the company and the employer is concerned that she has taken confidential information or illegally solicited clients. Employers feel entitled to review data stored on employer-provided, particularly where employees are instructed that the company owns the devices and has the right to monitor the data. As a general rule, the law supports employers here. An employer’s zeal to snoop, however, may subject it to both civil and criminal penalties under both federal and state statutes.
The Electronic Communication Privacy Act (ECPA) and the Stored Communications Act (SCA) both govern an employer’s ability to review electronic communications. The ECPA prohibits the interception of electronic communications, and the term “interception” as used in the ECPA has been interpreted narrowly. The SCA makes it illegal to “access without authorization a facility through which electronic communication service is provided,” making it illegal to obtain access to certain communications in electronic storage. With regard to an employer’s review of employee emails sent through web-based email accounts like Gmail or Hotmail, the most frequent scenario is where the former employer is able to access the former employee’s web-based email account because the employee saved his username and password on a device provided by the employer. In these cases, courts have typically sided with the former employee and have been reluctant to punish the former employee for failing to take appropriate steps to secure their own personal information and allegedly private communications. The former employee’s own negligence in securing personal data is not a defense for the employer.
Bottom line – an employer should seek advice before accessing an employee’s personal email account without authorization even though it has the ability to do so.
For more information on this topic please contact:
Howard Teplinsky at:
312-368-0100 or email@example.com.