Illinois Employment Agreements: Choice Of Law Clause?

Illinois employers use a variety of employment contracts depending on the type of employee and work contracted. Employment contracts can be written, oral, express, or implied. While written contracts are the easiest to enforce, oral contracts are also valid. Express contracts are formed by the parties' words, whether oral or written, and implied contracts are formed based on the parties' actions, conduct, or circumstances. Contracts cannot violate state or federal law and must comply with the Illinois Freedom to Work Act. Employers must provide employees with at least 14 days to review a restrictive covenant agreement. In 2024, employers with 50 or more full-time employees in Illinois are required to provide unpaid, job-protected leave to employees who experience the loss of a child by suicide or homicide.

Employment contracts

There are several types of employment contracts used in Illinois, depending on the type of employee and work contracted. Permanent contracts are used for permanent employees, who have regular hours and are paid regular compensation. Fixed-term contracts are for employees who work for a specific period or to complete a specific job. Independent contractor agreements are used for contractors or freelance workers, who are not company employees and have different rights and responsibilities. Employment contracts can be written, oral, express, or implied. Written contracts are the easiest to enforce as they contain the essential terms memorialized in writing and are signed by both parties. Oral contracts are not recorded in writing, while express contracts are agreements reached by the parties' words, whether oral or written. Implied contracts are legally binding obligations formed based on the parties' actions, conduct, or circumstances.

Illinois has seen several recent developments in its employment laws. From 1 January 2022, an amendment to the "Illinois Freedom to Work Act" changed restrictive covenant law by statute, making it harder for employers to enforce restrictive covenants against their employees. Noncompetition and nonsolicitation covenants are now only enforceable against individuals earning above certain salary thresholds and if they receive "adequate consideration". Additionally, employers must provide employees with at least 14 days to review the restrictive covenant agreement.

Another development is the pending legislation, effective from 1 April 2024, which will require temporary labour service agencies to pay temporary workers assigned to a third-party client for more than 90 days wages and benefits equal to the lowest-paid comparable direct-hire employee at the third party. Furthermore, Illinois voters will decide in November 2022 whether the state constitution should be amended to include a fundamental right for workers to unionize and collectively bargain. If passed, this amendment could effectively ban "right-to-work" laws in the state.

Restrictive covenants

In Illinois, an employment contract is an agreement between an employer and an employee that serves as the framework for their relationship. Employment contracts can be written, oral, express, or implied. While written contracts are the easiest to enforce, oral contracts are also valid.

Effective January 1, 2022, an amendment to the Illinois Freedom to Work Act changed the requirements for enforcing restrictive covenants. Noncompetition covenants are now only enforceable against individuals earning more than $75,000 per year, while nonsolicitation covenants apply to those making over $45,000 per year. Additionally, both types of covenants must be supported by "adequate consideration," meaning the employee must receive benefits or additional compensation. Employers must also provide employees with at least 14 days to review the restrictive covenant agreement and inform them of their right to consult an attorney before signing.

It's important to note that these changes do not apply retroactively to restrictive covenants in place before January 1, 2022. Employers should review their agreements to ensure compliance with the new requirements, especially regarding salary thresholds and adequate consideration.

In addition to restrictive covenants, Illinois has introduced other changes to its employment laws. For example, employers with 50 or more full-time employees must now provide unpaid, job-protected leave for those grieving the loss of a child. This demonstrates Illinois's evolving approach to employment contracts and the rights of workers.

Separation agreements

In Illinois, separation agreements are not mandated by law, meaning employers are not required to offer them, and employees are not required to sign them. However, if an employer chooses to offer a separation agreement, it must comply with all applicable state and federal employment or contract laws to be enforceable.

When creating a separation agreement, employers must explicitly include the claims the employee is waiving, and these claims must have arisen before the date of the agreement. Illinois employers must also notify the employee, in writing, of their right to have an attorney or representative review the agreement.

The Workplace Transparency Act, which came into effect on January 1, 2020, requires Illinois employers to offer employees 21 days to consider signing a separation agreement, regardless of the employee's age. Employees can waive this 21-day review period in writing. The Act also gives employees seven calendar days to revoke their acceptance of the agreement, which cannot be waived under federal law but can be waived under Illinois state law if done so in writing.

Illinois severance agreements can include non-compete provisions, but these are unenforceable against employees who were terminated without cause. Employers should also be aware of recent NLRB decisions that restrict the use of non-disparagement and confidentiality provisions in severance agreements. Additionally, non-disparagement clauses cannot restrict employees from discussing or disclosing facts related to sexual harassment or assault disputes.

Union rights

In the context of US labor law, right-to-work laws refer to state laws that prohibit union security agreements between employers and labor unions. In other words, they guarantee an employee's right not to join a labor union. As of 2024, about half of the states have right-to-work laws in place. However, Illinois is not one of them. In fact, in 2022, Illinois voters were given the opportunity to decide whether the Illinois Constitution should be amended to include a fundamental right for workers to unionize and collectively bargain. The amendment states that "no law [including agreements between employers and labor organizations] shall be passed that interferes with, negates, or diminishes the right of employees to organize and bargain". If passed, the amendment would effectively ban right-to-work laws in Illinois.

In Illinois, employment arbitration and other alternative dispute resolution (ADR) techniques are available to employers and employees seeking a quick and efficient resolution to employment disputes. Using ADR can reduce the burden and expense of litigation while maintaining fairness to all parties.

The Illinois Workplace Transparency Act (WTA) applies to employers with one or more employees within Illinois during 20 or more calendar weeks in a calendar year. The WTA's protections cover full-time and part-time employees, apprentices, unpaid interns, and consultants and contractors who perform work for the employer pursuant to a contract. Notably, the WTA does not apply to collective bargaining agreements. Under the WTA, employees cannot waive their right to testify in an administrative, legislative, or judicial proceeding concerning alleged criminal conduct or unlawful employment practices by the employer. Additionally, a settlement and termination agreement under the WTA can require confidentiality relating to alleged unlawful discrimination, harassment, or retaliation, but only if certain requirements are met. For example, the agreement must state that confidentiality is the employee's preference and beneficial to both parties, and the employer must notify the employee in writing of their right to have an attorney review the agreement before it is executed.

Illinois is an "employment at-will" state, meaning that an employer or employee may terminate the relationship at any time, without any reason or cause. However, employers cannot discriminate based on race, color, religion, sex, national origin, ancestry, citizenship status, age, marital status, physical or mental handicap, military service, or unfavorable military discharge. Employees who feel they have been discriminated against on these grounds can file a complaint with the Illinois Department of Human Rights. Additionally, if an employee feels they have not received equal pay for equal work because of their gender, they may file an equal pay complaint with the Illinois Department of Labor (IDOL).

Compliance with federal law

Federal law sets the minimum standards that must be met, and state law can provide additional protections for employees. For example, the federal minimum wage is $7.25 per hour, but Illinois has set a higher minimum wage of $12 per hour, which employers in the state must abide by.

Federal law also governs areas such as workplace safety, overtime rules, and anti-discrimination laws. For instance, the federal Occupational Safety and Health Act (OSHA) sets standards to ensure safe working conditions, and the Civil Rights Act of 1964 prohibits employment discrimination based on race, colour, religion, sex, or national origin.

In addition, federal law can restrict certain provisions in employment agreements. For example, the National Labor Relations Board (NLRB) has recently restricted the use of non-disparagement and confidentiality clauses in severance agreements.

Illinois employers should stay informed about both state and federal laws and ensure their employment agreements comply with both. They can use online platforms or seek legal counsel to ensure their agreements are up to date with current legislation.

Frequently asked questions