Many business owners heard headlines saying the Federal Trade Commission “banned non-competes” and assumed restrictive covenants were essentially over.

That is not what ultimately happened.

While the FTC attempted to implement a sweeping nationwide ban, that rule never took effect. Courts blocked it, the appeals process ended, and the agency later removed the rule from federal regulations. As a result, there is no nationwide prohibition on non-compete agreements in 2026.

However, that does not mean employers can use non-competes without limits. Federal regulators continue to monitor how restrictive covenants are used, and state laws still control most enforcement questions.

For Illinois employers, the most important rules come from Illinois state law, specifically the Illinois Freedom to Work Act.

The key takeaway is simple. Non-competes are still allowed in Illinois, but they must be carefully drafted, properly implemented, and tailored to legitimate business interests.

Quick Summary for Illinois Employers

• Non-competes are still legal in Illinois

• Salary thresholds apply

• 14-day review period required

• Agreements must be reasonable

• 2027 threshold increases are coming

 

Federal Update: The FTC’s Non-Compete Ban Did Not Take Effect

In 2024, the FTC issued a rule that would have banned most employee non-compete agreements across the United States.

Several lawsuits quickly challenged that rule. Federal courts ultimately struck it down in litigation including Ryan, LLC v. FTC. After the court decisions, the FTC withdrew its appeals and removed the rule from the Code of Federal Regulations.

That means there is no blanket federal ban on non-compete agreements in 2026.

Still, federal oversight has not disappeared. The FTC has repeatedly stated that certain restrictive covenants may qualify as “unfair methods of competition” under Section 5 of the FTC Act. Agreements that are overly broad or imposed indiscriminately may still draw scrutiny.

For employers, this means the issue has shifted from a nationwide rule to case-by-case enforcement and continued regulatory attention.

Illinois Law Governs Most Non-Compete Questions

For Illinois businesses, the controlling statute is the Illinois Freedom to Work Act (820 ILCS 90).

This law establishes specific requirements that determine whether a restrictive covenant is even eligible for enforcement. If these requirements are not met, the agreement can be declared invalid before a court even analyzes whether the restrictions are reasonable.

Below are the provisions that most often affect Illinois employers.

1. Income Thresholds Limit Who Can Be Asked to Sign

Illinois law restricts which employees can be required to sign non-compete and non-solicitation agreements.

In most situations, employers cannot require:

• Non-compete agreements for employees earning $75,000 or less per year
• Non-solicitation agreements for employees earning $45,000 or less per year

These thresholds are not fixed. The statute requires them to increase periodically.

A key planning date is approaching. On January 1, 2027, the thresholds rise to:

• $80,000 for non-compete agreements
• $47,500 for non-solicitation agreements

Businesses that rely on restrictive covenants should evaluate employees who fall near these thresholds and plan ahead for compensation adjustments, promotions, or contract renewals.

2. Specific Process Requirements Must Be Followed

Illinois also imposes procedural requirements that employers must follow when presenting a restrictive covenant.

Two steps are mandatory.

First, the employee must receive the agreement at least 14 calendar days before signing or at least 14 days before their start date.

Employees may choose to sign earlier, but only voluntarily.

Second, employers must provide written notice advising the employee to consult with an attorney before signing the agreement.

If an employer fails to follow these steps, the agreement may become unenforceable even if its terms would otherwise be considered reasonable.

For many companies, this means the enforceability issue is not the language of the agreement. It is whether the onboarding process was handled correctly.

3. Adequate Consideration Is Required

Illinois law also requires adequate consideration in exchange for a non-compete.

A commonly cited safe harbor is two years of continued employment after signing.

However, the law also allows other forms of consideration if they provide meaningful value to the employee. Examples may include:

• financial bonuses

• promotions or compensation increases

• additional professional opportunities

• other tangible benefits

The key requirement is that the consideration must be real and demonstrable.

If an employer asks an existing employee to sign a new restrictive covenant, the company should clearly document what the employee received in return.

4. Some Categories of Workers Cannot Be Bound by Non-Competes

Certain workers are restricted from non-compete agreements regardless of salary.

Examples include:

• Many construction workers, with limited statutory exceptions
• Certain public sector employees covered by collective bargaining rules
• Workers affected by specific COVID-19-related layoff or furlough provisions
• Certain licensed mental health professionals who provide services to veterans or first responders under newer Illinois restrictions

Businesses operating in regulated industries or employing multiple job categories should periodically review their templates to ensure they are compliant.

A single “one-size-fits-all” agreement is rarely appropriate.

5. Restrictions Must Still Be Reasonable

Even when the statutory requirements are satisfied, Illinois courts will enforce a non-compete only if it is reasonable and narrowly tailored.

Courts typically evaluate several factors, including:

• Duration of the restriction
• Geographic scope
• The specific activities being restricted
• The employee’s access to confidential information or client relationships

A restriction must protect a legitimate business interest without imposing unnecessary hardship on the employee or harming the public.

In practical terms, overly broad restrictions increase the likelihood that a court or regulator views the agreement as punitive rather than protective.

6. Enforcement Risks Can Be Significant

Illinois law includes a fee-shifting provision.

If an employer sues to enforce a non-compete or non-solicitation agreement and the employee prevails, the employee may recover attorneys’ fees and costs associated with the claim.

Additionally, the Illinois Attorney General has authority to pursue enforcement actions for patterns of unlawful restrictive covenant use.

This increases the risk for businesses that rely on agreements that are overly broad or implemented incorrectly.

What Illinois Employers Should Do Now

Businesses that use restrictive covenants should periodically review both their agreements and their implementation procedures.

A practical compliance checklist includes the following steps.

1. Review both your contracts and your onboarding process
Make sure the 14-day review period, attorney consultation notice, and documentation procedures are consistently followed.

2. Plan for the 2027 compensation threshold changes
Employees near the current income thresholds may move into or out of eligibility when the limits increase.

3. Tailor agreements to real business risks
Focus on protecting legitimate interests such as trade secrets, confidential information, key client relationships, and goodwill.

4. Consider alternatives to broad non-competes
Confidentiality agreements, trade secret protections, invention assignments, and carefully drafted non-solicitation provisions may provide effective protection with lower legal risk.

5. Monitor federal enforcement trends
Even without a nationwide ban, federal regulators continue to scrutinize restrictive covenants that appear overly broad or widely imposed on low-risk roles.

The Bottom Line

Non-compete agreements have not disappeared in Illinois.

They remain available tools for protecting legitimate business interests, but they are heavily regulated and increasingly scrutinized.

Employers that fail to comply with statutory requirements or rely on overly broad restrictions risk ending up with agreements that are unenforceable and expensive to litigate.

For many businesses, now is the right time to review existing agreements, update templates, and ensure internal processes comply with Illinois law.

If you would like assistance reviewing your current agreements or tailoring restrictive covenants to specific roles within your business, the Chicago business attorneys at Bellas & Wachowski can help you evaluate your options and develop compliant workplace protection strategies.