Employment Contract Law
Employment in Illinois is considered “at-will,” which generally means that either the employer or the employee may terminate the employment relationship at any time, for any reason or no reason at all, as long as is the employer’s action is not prohibited by law. The state and federal laws prohibiting the termination of an employment relationship include laws prohibiting discrimination based on the employee’s membership in a protected class, or prohibiting retaliation for the employee’s engagement in protected activity. In addition, the employer may not terminate an employee if doing so is in violation of an employment contract.
Under some circumstances, employers and employees will form a contract governing the employment relationship, including wages, hours, benefits, job duties, termination requirements, duration of employment, confidentiality agreements, severance packages, and non-compete agreements. Once a valid contract is formed, it is legally binding upon both parties and can be enforced in court.
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Employees should also beware of restrictive language in employment contracts. Restrictive language in employment agreements can often be confusing; non-competition clauses, restrictions on the use of confidential information, and non-solicitation clauses may seem quite similar. This article explains the various types of restrictive covenants. In general, the four types of restrictive covenants are:
- Restrictions on the use of confidential information
- Anti-raiding of employees
- Non-solicitation of customers
- Non-compete agreements/provisions
For each type of restrictive covenant, an employer may be able to seek action against an employee if the covenant is breached. If an employee has a restriction in his/her employment agreement, the employer may be able to bring an action against the employee for breach of contract if he/she does not adhere to the restriction. Likewise, the employer may have a remedy against the employee under a state statute (such as the Illinois Trade Secrets Act) or a common law claim for breach of fiduciary duty or misappropriation of trade secrets, even if the employee never signed an employment agreement.
Restrictions on Use of Confidential Information
For the employee, this is the least onerous of the four types of restrictive covenants. These restrictions prohibit a former employee from “using” or “misappropriating” confidential information that the employee learned or to which the employee had access while employed.
Anti-Raiding of Employees
These provisions prohibit former employees from inducing other employees to leave the former employer or to form a competing business. The duration of the restriction may vary but must be “reasonable” in order to be enforceable.
Non-Solicitation of Customers
Non-solicitation provisions prohibit former employees from inducing customers to stop doing business with the employee’s former employer and/or from going into business with the former employee. Such provisions typically prohibit contact with and solicitation of customers with whom the employee has dealt within the last six months (or a similar period of time) of the employee’s employment. Like anti-raiding provisions, the duration of the restriction may vary but must be “reasonable” in order to be enforceable.
Non-compete agreements or provisions are the most onerous of the restrictive covenants for employees, because they may diminish the ability of a former employee to earn a living. These provisions prohibit former employees from engaging in a “competing business” with the former employer. How broadly or narrowly the term “competing business” is defined is essential, but the term generally means that the employee may not work for a competitor for a certain period of time. In order to be enforceable, non-compete provisions must be reasonable in scope, duration, and geographic limitations. The more specialized the former employer’s business, the more extensive a non-compete provision can be under the law.
FAQs About Employment Law
Q: How can I tell if I was wrongfully terminated?
A: Employment in Illinois is considered “at-will,” which means that an employer generally does not need to provide a reason for termination. Consequently, an employee’s termination typically only gives rise to a legal claim if it violated a specific statute or employment contract. Some common unlawful termination claims include discrimination based on an employee’s membership in a protected class or retaliation for engaging in a protected activity.
Q: How can I tell if I’m entitled to overtime?
A: The Fair Labor Standards Act (“FLSA”) divides employees into two categories: exempt and non-exempt. If an employee is exempt, then they are not entitled to the overtime pay requirements of the FLSA. Some common exemptions include the Executive, Administrative, Professional, and Outside Sales exemptions. Determining whether an employee fits into one of these categories depends on the employee’s primary job duties. The FLSA does not apply to independent contractors.
Q: What if I’m not being paid for the number of hours I am working?
A: The FLSA mandates that employees are paid for all hours worked. However, whether time spent on certain activities is considered “compensable” is not always clear. Some common issues that arise regarding compensable time relate to pre- and post-shift activities and security checks, travel time, training, on-call and waiting time, meal periods and rest breaks, and sleeping. The analysis usually turns on whether the activities performed are “integral and indispensable” to an employee’s principal activities. If you are not being paid for all compensable time worked, then you may have an FLSA claim.
Q: What is the difference between an independent contractor and an employee?
A: Independent contractors are not afforded the same range of legal protections that employees are, including the overtime pay requirements of the FLSA. Employers often misclassify employees as independent contractors as a means to avoid paying overtime. There are several factors courts use to determine whether an individual is an independent contractor or employee. Among the factors which the Court has considered significant are:
- The extent to which the services rendered are an integral part of the principal’s business;
- The permanency of the relationship;
- The amount of the alleged contractor’s investment in facilities and equipment;
- The nature and degree of control by the principal;
- The alleged contractor’s opportunities for profit and loss;
- The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor; and
- The degree of independent business organization and operation.
Q: Is it mandatory for my employer to pay me severance if I’ve been laid off?
A: Generally, no. Although, while employers are not required to offer severance benefits to their employees, severance policies are a common feature of employer-provided benefit packages. There are a variety of reasons why employers offer severance to laid-off employees, but one common reason is it is a way of avoiding litigation since severance benefits can be offered in exchange for a terminated employee’s release of claims against the employer.
Q: Can my employer force me to take a drug test?
A: Most likely yes. Many employers require employees to submit to drug and alcohol testing either before being hired, during employment, or both. There is minimal legislation addressing the scope of an employee’s right to privacy in the private sector workplace, specifically when it comes to drug testing.
Turn to Caffarelli & Associates when you need an employment lawyer in Chicago. As employment and contract law attorneys that serve the Chicagoland area, we are here for you. Get a free consultation today!