Illinois Non-Compete Law: Are You Ready for 2026?

The Illinois Attorney General just dropped a bombshell settlement with Equinox Holdings, Inc. over its non-compete clauses, and it’s going to affect thousands of current and former employees in the state. The AG’s action is part of a much bigger crackdown on restrictive employment agreements, which forces a tough question on Illinois businesses: are your employment contracts actually compliant with current state law?

The Illinois Freedom to Work Act: Recent Enforcement

The Illinois Freedom to Work Act (820 ILCS 90/1 et seq.) dictates the rules for restrictive covenants in employment contracts. While it’s been around since 2017, the major amendments that took effect on January 1, 2022, completely changed the game for employers by codifying protections for workers, especially those in lower-paying jobs, against unfair non-compete and non-solicitation clauses. The settlement that Illinois Attorney General Kwame Raoul just announced with Equinox Holdings, Inc. is a clear signal that the state is serious about enforcement. A press release from the Illinois Attorney General’s Office (https://illinoisattorneygeneral.gov/) states the settlement was over allegations that Equinox made employees like personal trainers and massage therapists sign illegal non-compete agreements. For many of those workers, the agreements, which blocked them from working for a competitor after leaving, were completely unenforceable under the updated 2022 statute. This case proves the AG is perfectly willing to pursue enforcement actions against companies, even big household names, that don’t get their practices in line with Illinois law. Before 2022, whether a non-compete was enforceable in Illinois was a messy affair based on common law principles and subjective court decisions. The updated Act wiped away that ambiguity with clear, objective thresholds, meaning employers absolutely cannot rely on old case law when they draft or try to enforce these agreements.

Changes to Non-Compete and Non-Solicitation Agreements in Illinois

The 2022 amendments to the Illinois Freedom to Work Act introduced fundamental changes that every employer in the state has to understand. These adjustments significantly rebalance power between employers and employees regarding restrictive covenants. First, the Act is now black-and-white about when a non-compete is allowed. A non-compete covenant is unenforceable unless the employee’s actual or expected annualized earnings are more than $75,000 per year. That number isn’t fixed. It’s scheduled to jump to $81,500 on January 1, 2027, and will keep adjusting every five years with the Consumer Price Index. So, if you have employees earning less than that, any non-compete they signed after January 1, 2022, is probably worthless. The Act also created a separate earnings floor for non-solicitation agreements. A covenant restricting an employee from soliciting clients or co-workers is unenforceable unless that employee makes more than $45,000 per year. This threshold also increases, hitting $48,750 on January 1, 2027, and adjusting every five years from there. This distinction is important because many employers used to just bundle these clauses together. Separate analyses are now required. On top of the salary thresholds, the Act codified the old common law rule that restrictive covenants need adequate consideration. For any agreement signed after January 1, 2022, that means one of two things:

• The employee works for the company for at least two years after signing the agreement, or
• The employer gives some other form of adequate consideration, like a cash bonus or specialized training that’s valuable enough to support the restriction (the Act is a bit vague here, leaving it open to interpretation). But just offering the job in the first place doesn’t count if the person leaves before two years are up.

The law also requires employers to give employees written notice of the agreement at least 14 calendar days before they start work or before the agreement takes effect. The notice also has to advise the employee in writing to talk to a lawyer. If you miss this step, the agreement is void. A lot of companies mess this up, often dropping contracts on an employee’s desk on their first day. That practice is now explicitly non-compliant. Finally, the Act has a section dealing with employees who are terminated or furloughed because of something like the COVID-19 pandemic. In those situations, a non-compete is unenforceable unless the employer pays severance equal to the employee’s base salary for the entire restricted period. This protects people who get laid off in a bad economy from being locked out of their own industry.

Who is Affected?

The Illinois Freedom to Work Act, especially after the Equinox settlement, impacts virtually every employer in Illinois. All employers with employees in Illinois are affected. It doesn’t matter if you’re a huge corporation or a small shop. If you use non-compete or non-solicitation agreements, your paperwork must align with the statute. The Attorney General’s office has made it clear that enforcement is a priority for any entity, large or small, in Chicago, Springfield, Rockford, or anywhere else that fails to protect employee rights. Employees earning below the statutory thresholds are the biggest beneficiaries. The Act gives them real protection against being unfairly boxed out of job opportunities. A personal trainer in Lincoln Park, a retail clerk in Naperville, or a call center worker in Peoria earning less than the threshold can now jump to a competitor without worrying about a lawsuit over a non-compete. This significantly impacts career mobility in many sectors. The Equinox settlement went after roles like personal trainers and massage therapists, which tells you that industries with skilled but often lower-paid workers are under the microscope. Think fitness centers, spas, salons, healthcare support, and some retail jobs. These are all places where non-competes were common but are now mostly illegal for a huge chunk of the staff. Human resources departments and legal counsel in Illinois are now on the hook. They’re the ones who have to review and rewrite every employment contract. This requires ongoing attention. The earnings thresholds increase over time, so periodic review is essential. The cost of getting this wrong can be huge, we’re talking legal fees, civil penalties up to $5,000 for each violation (or $10,000 for repeat violations), and having all your restrictive covenants thrown out by a court, on top of paying restitution.

Concrete Steps for Illinois Employers to Ensure Compliance

Given the law’s strictness and the AG’s clear intent to enforce it, Illinois employers must get proactive.

Audit Existing Agreements

The first thing to do is a full audit of every existing employment agreement with a non-compete or non-solicitation clause. For each one, you have to ask:

• When was it signed? Anything before January 1, 2022, is under the old common law rules, but post-2022 agreements have to meet the new statutory test.
• What are the employee’s annualized earnings? Does the salary clear the $75,000 (non-compete) and $45,000 (non-solicitation) thresholds? Keep in mind these numbers go up in 2027.
• Was the 14-day notice given? For any agreement signed after January 1, 2022, if you can’t prove you gave 14 days’ written notice and told them to see a lawyer, the agreement is probably dead on arrival.
• Was there adequate consideration? Can you show two years of continued employment after signing, or did you provide some other real, documented benefit?

Any contract that fails this check needs to be flagged for revision or simply accepted as unenforceable. It’s much better to find and fix these problems yourself than to wait for a letter from the Attorney General.

Revise Standard Employment Contracts

Use what you learned from the audit to update your standard contract templates. Make sure that:

• Non-compete clauses only go into contracts for positions that clearly meet the earnings threshold.
• Non-solicitation clauses are used only for positions that meet their separate, lower threshold.
• The contract language explicitly mentions the 14-day notice period and advises consulting an attorney.
• The contract spells out the consideration being provided, especially if it’s something other than the two-year employment safe harbor.
• You should probably have different contract templates for employees who are above and below the earning thresholds.

Implement Training for HR and Management

Your HR people and any manager who’s part of the hiring process needs to be trained on this law, period. They have to understand:

• The exact earnings thresholds and when they increase.
• The 14-day notice requirement and why documenting it is non-negotiable.
• What counts as adequate consideration.
• What they can and can’t say in offer letters and contract discussions.
• The rules around severance if a furloughed or terminated employee has a restrictive covenant.

Monitor Legal Developments

The law around restrictive covenants is always changing. The Illinois Freedom to Work Act is clear, but courts will continue to interpret it, and new cases will pop up. Employers should:

• Keep an eye on new court rulings and any new guidance from the Illinois AG’s office.
• Talk regularly with an employment law attorney to stay compliant.
• Watch for federal action on non-competes. The Federal Trade Commission has proposed its own rules that could add another layer of regulation on top of state law.

Taking these steps is about more than just avoiding fines. It’s about running a transparent and legally defensible operation. Failing to adapt exposes a business to serious legal, financial, and reputational risks. The Equinox settlement is a warning for all Illinois businesses. The Illinois Attorney General is actively enforcing the Freedom to Work Act, and non-compliance carries consequences. Review employment agreements, train staff, and align practices with Illinois law now to protect your business from legal exposure.