SPRINGFIELD — Illinois Attorney General Lisa Madigan has sued payday loan lender Check into Cash of Illinois LLC for allegedly violating the Illinois Freedom to Work Act by requiring employees to sign non-compete agreements.
Brian Ellixson, an attorney at Fisher Phillips in Philadelphia, told the Cook County Record that the case marks the first time the state's top law enforcement official has flexed muscle under the new state law forbidding employers from requiring such contracts from lower-wage workers.
The suit, filed Oct. 25 in Cook County Circuit Court, alleges that Check Into Cash was requiring employees who make minimum wage sign non-compete agreements. The lawsuit may be a sign that the attorney general will only further step up enforcement of that law across Illinois.
The Illinois Freedom to Work Act went into effect on Jan. 1 and prohibits the use of such agreements - typically used to keep workers from hopping to a competing company - for employees earning minimum wage or less than $13 an hour. Check Into Cash, which has 33 locations in Illinois alone, allegedly requires that all employees sign a non-compete agreement regardless of position, time employed with the company or their wage. The agreement also allegedly prohibits employees from working at any direct or indirect lending institution and within 15 miles of any Check Into Cash location, even if it’s not the location the employee worked for.
Check Into Cash’s agreements are not tailored to any particular business of theirs, which is one of three components an employer needs to consider when adding a no-competition clause. These clauses must “be supported by adequate consideration, narrowly tailored in time, activity and geography to protect the employer’s legitimate business interests and not apply to low-wage employees, as defined by the Freedom to Work Act,” Ellixson said.
Other states have also been working to ensure employers are not infringing upon minimum wage workers’ rights with forced no compete clauses, Ellixson said.
In New York, that state's attorney general's office has "actively investigated non-compete agreements in the low-wage context," he said. Ellixson noted New York settled with several companies in 2016, requiring the companies to remove the non-compete clause from employment agreements.
“Proponents of the act have argued that such actions are necessary to ensure that low-wage employees have the freedom to change jobs and seek better pay," Ellixson said. "Many cite a May 2016 White House report summarizing the negative effects of non-competes on the U.S. labor market.”
But while employers may be concerned with the possibility of an ex-employee poaching their business, Ellixson said companies should review their non-compete agreements to make sure that they are in compliance with the law.
“An employer would likely argue that non-compete agreements are necessary to ensure that its former employees cannot solicit their former customers or disclose trade secrets to a competitor," he said.
Ellixson, however, suggested employers consider other steps, such as confidentiality agreements, to safeguard "trade secret information."
"Employers should evaluate the extent to which their low-wage employees are building a customer base or have access to trade secret information," he said.