Bill Text: IL HB4923 | 2009-2010 | 96th General Assembly | Introduced

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Bill Title: Creates the Illinois Covenants Not to Compete Act. Establishes criteria for enforceability of covenants not to compete. Creates certain rebuttable presumptions as to the enforceability of covenants not to compete. Establishes remedies and procedures for enforcing covenants not to compete. Effective January 1, 2011.

Spectrum: Partisan Bill (Republican 2-0)

Status: (Introduced - Dead) 2010-03-15 - Rule 19(a) / Re-referred to Rules Committee [HB4923 Detail]

Download: Illinois-2009-HB4923-Introduced.html

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96TH GENERAL ASSEMBLY State of Illinois 2009 and 2010 HB4923 Introduced 1/15/2010, by Rep. Rosemary Mulligan SYNOPSIS AS INTRODUCED:
New Act
Creates the Illinois Covenants Not to Compete Act. Establishes criteria for enforceability of covenants not to compete. Creates certain rebuttable presumptions as to the enforceability of covenants not to compete. Establishes remedies and procedures for enforcing covenants not to compete. Effective January 1, 2011.
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A BILL FOR
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AN ACT concerning business.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 1. Short title. This Act may be cited as the
Illinois Covenants Not to Compete Act.
Section 5. Definitions. As used in this Act, the following
definitions apply:
(a) "Promisor" means a party against whom a covenant not to
compete is sought to be enforced.
(b) "Promisee" means a party seeking to enforce a covenant
not to compete.
(c) "Covenant not to compete" means a restriction which
prevents a promisor from working for or providing personal
services to a person or entity in competition with the
promisee.
(d) "Key employee" or "key independent contractor" means
any employee or independent contractor who: (i) has substantial
involvement in the executive management of the promisee's
business, (ii) has direct and substantial contact with
customers of the promisee, (iii) has knowledge of bona fide
trade secrets or other proprietary information of the promisee,
(iv) has such unique skills that the person has achieved a high
degree of public or industry notoriety, fame, or reputation as

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a representative of the promisee, or (v) is among the highest
paid 5% of the promisee's employees or independent contractors
in the year preceding a separation from service by the key
employee or key independent contractor.
(e) "Legitimate business interest" means: (i) customer
relationships developed and maintained by the promisee, (ii)
trade secrets or other proprietary information of the promisee
to which a promisor was granted meaningful or regular access,
or (iii) business goodwill of the promisee.
(f) "Trade secrets" means any trade secrets as defined in
the Illinois Trade Secrets Act and the common law under such
Act.
Section 10. Criteria for enforceability of covenants not to
compete. A covenant not to compete is void as an illegal
restraint of trade and may not be enforced by a court in this
State, unless:
(a) the promisee is a key employee or key independent
contractor;
(b) the promisor either: (i) informs the key employee or
key independent contractor in a written offer at least 2 weeks
prior to the first day of the employment or contractor
relationship that a covenant not to compete is required as a
condition of employment or services, or (ii) enters into the
covenant not to compete with the promisee upon: (A) a material
advancement or promotion of the key employee or key independent

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contractor, or (B) payment of a material bonus or material
increase in rate of regular compensation; and
(c) the covenant not to compete is narrowly tailored to
support the protection of a legitimate business interest of the
promisee against actual or threatened infringement by the
promisor.
Section 15. Rebuttable presumptions.
(a) A covenant not to compete shall be presumed not to meet
the criteria under subsection (c) of Section 10 if: (i) the
duration of the covenant not to compete exceeds one year, (ii)
the geographic area of the covenant not to compete extends
beyond any region in which the key employee or key independent
contractor provided employment or contractor services for the
promisee during the one year preceding termination of the
employment or independent contractor relationship, or (iii)
the type of personal services activity subject to the covenant
not to compete extends beyond the nature of work the key
employee or key independent contractor provided to the promisee
during the one year preceding termination of the employment or
independent contractor relationship.
(b) A promisee may introduce evidence to rebut the
presumptions in subsection (a) of this Section upon a showing
that more extensive restrictions are necessary to protect a
legitimate business interest.

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Section 20. Remedies and procedures in actions to enforce
covenants not to compete.
(a) Modification. For any action brought to enforce a
covenant not to compete in which the covenant is found not to
meet the criteria in subsection (c) of Section 10, the court
retains discretion to modify the covenant not to compete to the
extent necessary to make the restraint reasonable under the
circumstances. If the court so modifies the covenant, the court
may not award the promisee any damages for a breach of the
covenant not to compete occurring before an order of
modification.
(b) Attorney's Fees and Costs of Litigation. For any action
brought to enforce a covenant not to compete in which the
subject agreement contains a provision granting the promisee a
right to recover attorney's fees or other costs of litigation
from the promisor, such provision shall be construed to provide
the promisor with a mutual entitlement to attorney's fees or
other costs of litigation should it be the prevailing party
against the promisee.
(c) Declaratory Judgment. Any promisor has the right to
file an action under Section 2-701 of the Code of Civil
Procedure for a declaration of his or her rights under a
covenant not to compete, and in the event the promisor is the
prevailing party in such a proceeding, the court may award him
or her reasonable attorney's fees and court costs.

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Section 25. Exceptions. This Act does not apply to and
shall not modify the common law with respect to:
(a) any agreement relating to the solicitation, hiring, or
contact with employees, vendors, or customers;
(b) any confidentiality agreement;
(c) any agreement between: (i) a corporation, partnership,
limited liability partnership, limited liability company, and
(ii) its shareholders, partners, or members; and
(d) an agreement between an employer and employee under
which an employee receives incentive compensation of any kind,
and where the employer is entitled to forfeiture of such
compensation for competition.
Section 99. Effective date. This Act takes effect January
1, 2011.