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Noncompete News Alert: Recent Significant Settlement Demonstrates Illinois AG's Commitment to Enforcement of Restrictive Covenant Laws

Date   Nov 4, 2026

Restrictive covenants, and noncompete agreements in particular, have long been a challenge for Illinois employers. Both within and outside of Illinois, there has been increased attention recently on legislative reforms and litigation between employers and employees.  As of October 9, 2026, however, Illinois employers are on notice that regardless of whether an employer attempts to, or even intends to, enforce an unlawful noncompete or nonsolicitation agreement, there is a possibility they could be subject to liability for substantial penalties.

Illinois Freedom to Work Act’s Limitations on Restrictive Covenants

Illinois originally enacted the Freedom to Work Act in 2017, and until January 1, 2022, the law prohibited noncompete agreements for “low-wage employees” and did not provide for civil remedies or enforcement mechanisms. “Low-wage employees” were defined as employees whose hourly earnings did not exceed the applicable minimum wage or $13.00, whichever was greater.

But effective January 1, 2022, Illinois overhauled the Freedom to Work Act, in effect codifying years of case law regarding criteria for enforceability and imposing additional threshold requirements for validity.  The latter included:

  • A prohibition on noncompete agreements with employees who earn or are expected to earn $75,000 or less per year;
  • A prohibition on nonsolicitation agreements with employees who earn or are expected to earn $45,000 or less per year;
  • A requirement that employers must provide at least 14 calendar days for an employee (or applicant) to review a noncompete or nonsolicitation agreement before it becomes effective; and
  • A requirement that employers advise employees in writing to consult with an attorney before entering into a nonsolicitation or noncompete agreement.

The amendments also added enforcement provisions and penalties for violations, including giving the Illinois Attorney General the power to conduct an investigation and bring an enforcement action where it “has reasonable cause to believe that any person or entity is engaged in a pattern and practice prohibited by” the Act. As a result of the amendments, the Attorney General may obtain monetary damages, restitution, injunctive relief, and civil penalties of up to $5000 for a violation and up to $10,000 for each repeat violation within a five-year period. 

Since the 2022 amendments, litigation involving the Freedom to Work Act has addressed enforceability questions such as adequacy of consideration and reasonableness of restrictions.  And while the Illinois Attorney General has conducted investigations, settlements have focused on eliminating unlawful restrictive covenants and not on monetary penalties.

Recent $1.9 Million Settlement

On October 9, 2026, however, that changed. The Circuit Court of Cook County entered a consent decree resolving the Illinois Office of the Attorney General’s claims against a company under the Illinois Freedom to Work Act.  In its complaint, the Attorney General alleged the company violated the Act by: 

  • Requiring employees whose actual or expected income was $75,000 per year or less to sign noncompete agreements;
  • Requiring employees whose actual or expected income was $45,000 per year or less to sign nonsolicitation agreements;
  • Failing to provide written notice advising employees to consult with an attorney before entering into nonsolicitation or noncompete agreements; and
  • Failing to provide employees with a copy of the nonsolicitation or noncompete agreements at least 14 calendar days before commencement of employment or the effective date of the agreements.

Notably, however, the terms of the consent decree acknowledge that the company did not at any time seek to enforce any such agreements and that in 2025 it notified current and former employees who may have entered into any such agreements that the agreements would be considered null and void retroactive to the date they were signed. Even so, in addition to other remedies similar to the AG’s prior settlements, the company is to pay $990,000 in restitution to affected employees and $910,000 in civil penalties. 

In other words, the Attorney General sought the above penalties even though there did not appear to have been any actual enforcement or even attempted enforcement of the allegedly unlawful agreements.

Takeaways for Illinois Employers

The Attorney General’s willingness to pursue enforcement and substantial penalties based on the existence of the allegedly unlawful agreements should be taken as a warning to Illinois employers that the state is scrutinizing employers’ practices with respect to restrictive covenants. Apart from the recent settlement discussed above, in its 2026 “Labor Day Report,” the Attorney General’s Office reported that its Workplace Rights Bureau has grown to double its size and has opened more than 115 investigations into anticompetitive labor practices, employment discrimination, wages and misclassification, workplace safety, and other employment-related matters since 2019.

The Attorney General’s Office has become more active in matters relating to employee protections in recent years, and this recent settlement should signal to Illinois employers that investigation and enforcement efforts may indeed escalate.  Employers with an Illinois workforce should review any employment documents, such as offer letters, employment contracts, or severance agreements, that were or will be entered into after January 1, 2022, to ensure they meet the requirements under the Illinois Freedom to Work Act.

If you have any questions regarding this Alert, please contact either of the authors, Becky Kalas bkalas@fordharrison.com or Kimberly Ross kross@fordharrison.com, attorneys in our Chicago, Illinois office, or any member of FordHarrison's Noncompete, Trade Secrets and Business Litigation practice group. Of course, you can also contact the FordHarrison attorney with whom you usually work.