While restrictive covenants abound in the employment landscape, the Illinois legislature is shoring up efforts to rein in the use of such agreements. The latest push? A bill to amend the Illinois Freedom to Work Act to expand the ban on noncompetes to a larger population of workers and provide certain rights to employees who are asked to sign noncompete and nonsolicitation agreements as a condition of employment. With Gov. J.B. Pritzker poised to sign that bill, employers should begin evaluating how those amendments will impact their use of noncompete and nonsolicitation agreements and what changes will be necessary to comply with the new law.
Recently, in Pittsburgh Logistics Systems, Inc. v. Beemac Trucking, LLC, No. 31 WAP 2019, — A.3d –, 2021 WL 1676399 (Apr. 29, 2021), the Pennsylvania Supreme Court found that a no-hire provision that was ancillary to a services contract between two businesses was an unreasonable restraint on trade and was therefore not enforceable. In ruling on this matter of first impression, the Court identified several important factors that employers should consider before entering into a no-hire provision that places restrictions on the movement of their employees.
On March 12, 2021, the American Rescue Plan Act of 2021 (ARP) was signed into law, providing an estimated $1.9 trillion stimulus package to address the ongoing COVID-19 pandemic. Some of the ARP’s key provisions include a number of employment-related sections that build upon prior legislation to create a scaffold of employer obligations and worker entitlements arising from the pandemic’s impact on the U.S. economy.
California is notorious in the non-compete world for its prohibition and extreme scrutiny of individual non-compete and other types of restrictive covenant agreements. These types of agreements between two businesses, however, have received less attention.
In August, the Supreme Court of California in Ixchel Pharma, LLC v. Biogen, Inc., 470 P.3d 571, 573 (Cal. 2020), examined an agreement between two businesses and found “that a rule of reason applies to determine the validity” of business-to-business non-compete agreements. While some commentary on Ixchel has examined the validity of business-to-business non-compete agreements, the larger focus of the Ixchel case was “whether contractual restraints on business operations or commercial dealings are subject to a reasonableness standard under [California Business and Professions Code] section 16600.” Id. at 581 (emphasis added). It is important to note that the Ixchel court reiterated California’s strong position that agreements not to compete related to the termination of employment are invalid and not subject to a reasonableness test. Id. at 583-584. The Ixchel court adopted the reasonableness standard from the Cartwright Act (California’s antitrust law which generally assesses whether an agreement promotes or suppresses competition) for application to business-to business non-competes and further stated that its decision potentially affects all California contracts “that in some way restrain a contracting party from engaging in a profession, trade, or business.” Id. at 581, 588.
On August 8, 2020, President Trump authorized the creation of the Lost Wage Assistance (LWA) program to provide lost wage assistance to unemployed individuals as a result of COVID-19. The LWA is intended to provide additional unemployment assistance after the Coronavirus Aid, Relief and Economic Security (CARES) Act’s $600 per week supplement expired on July 31, 2020. Under the LWA program, eligible claimants may receive $300 or $400 in supplemental benefits.
The Federal Emergency Management Agency (FEMA) will provide grants to participating states, territories and the District of Columbia for lost wage assistance. States may provide eligible claimants $400 per week, with a $300 federal contribution, in addition to an individual’s regular weekly unemployment benefit (UI) amount. The benefit is funded using 75% from the Disaster Relief Fund administered by FEMA and the remaining 25% through state unemployment insurance funding.
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (CARES Act) was signed into law, providing an estimated $2 trillion stimulus package to address the COVID-19 pandemic. Although the CARES Act has a number of employment-related provisions (as discussed here), a central piece of the legislation expands existing unemployment insurance programs, making far more individuals eligible and providing greater benefits than existing programs. As employers consider workplace actions during this time of uncertainty, understanding the impact of the new unemployment insurance landscape and the options available will inform employers as they make critical decisions suited to their circumstances and workforce.