We informed our readers on March 31, 2009 about Illinois House Bill 4040, titled "Illinois Covenants Not to Compete Act" (link). House Bill 4040 attempted to limit non-compete enforcement to employees or independent contractors who:
- have substantial involvement in the executive management of the employer’s business;
- have direct and substantial contact with the employer’s customers;
- possess knowledge of the employer’s trade secrets and/or proprietary information;
- possess such unique skills that they have achieved "a high degree of public or industry notoriety, fame, or reputation as a representative of the employer;" or
- are among the highest paid 5% of the employer’s work force for the year immediately preceding the separation.
House Bill 4040 also attempted to change Illinois law by:
- eliminating an employer’s ability to enforce a non-competition covenant if the employer failed to notify the new employee two weeks prior to the first day of his employment that a covenant not to compete is required, or if the covenant is not accompanied by a "material" advancement, promotion, bonus or compensation increase;
- creating a rebuttable presumption that a non-competition covenant is invalid if the covenant exceeds one year, the geographic restrictions in the covenant cover areas beyond which the former employee provided services "during the one year preceding his termination;" or if the covenant concerns personal services activities that the employee did not perform during the "one year preceding termination of their employment;"
- forbidding a court, if it chooses to modify an existing covenant, from imposing a damages award for the employee’s original breach of the covenant;
- instructing a court to interpret any attorneys’ fees provision found in a non-competition covenant to allow either the employer or the employee to recover their attorneys’ fees
- empowering the court to award attorneys’ fees to the employee if, through a declaratory judgment action brought by the employee, the court declares the non-competition covenant unenforceable.
House Bill 4040 was introduced by Representative Rosemary Mulligan (Republican – 65th District) and never made it out of committee. Hence, the Bill terminated when the Illinois House of Representatives concluded its session. However, Representative Jil Tracy (Republican – 93rd District) introduced a bill identical to House Bill 4040 on January 12, 2011. Representative Mulligan became a co-sponsor of Representative Tracy’s bill, House Bill 0016, on February 4th. So far, House Bill 0016 has not attracted significant public attention or traction in the Illinois House. Nevertheless, we will continue to monitor House Bill 0016 and any other actions the Illinois House or Senate may undertake with respect to non-competition agreements or trade secrets.