Do Illinois laws limit the scope of NDAs for low-wage employees?

Yes, Illinois law significantly limits the scope of Non-Disclosure Agreements (NDAs) for low-wage employees. Under the Illinois Freedom to Work Act, any agreement that functions as a de facto non-compete—effectively preventing an employee from working in their chosen profession—is unenforceable if it fails to meet strict statutory requirements.

The Illinois Freedom to Work Act and NDAs

The Illinois Freedom to Work Act (820 ILCS 90/) was significantly amended to prevent employers from using restrictive covenants to suppress wages or limit worker mobility. While the Act specifically targets non-compete and non-solicitation agreements, it also applies to any contract that has the effect of restricting an employee's ability to work.

When an NDA Becomes a Non-Compete

Illinois courts look at the substance of an agreement rather than its title. If your NDA contains clauses that are so broad they prevent an employee from using their general skills, knowledge, or experience at a new job, the court will likely reclassify it as a non-compete. Once reclassified, the agreement must comply with the following:

• Legitimate Business Interest: The employer must prove the restriction is necessary to protect a specific, protectable interest (e.g., trade secrets, confidential customer lists).
• Reasonableness: The scope of the restriction must be reasonable in terms of time, geographic area, and activity.
• Consideration: For employees hired after January 1, 2022, the employer must provide at least two years of continuous employment or other adequate consideration (such as a professional bonus or promotion).

Key takeaway: If your NDA prevents an employee from working for a competitor by claiming all industry knowledge is a 'trade secret,' it is likely unenforceable under Illinois law.

Action Item: Audit your existing NDA templates to ensure they do not include 'catch-all' confidentiality clauses that effectively bar an employee from working in their industry.

Salary Thresholds and Statutory Compliance

Illinois law establishes clear financial thresholds that determine the validity of restrictive covenants. These thresholds are adjusted annually to account for inflation.

If an employee earns below these thresholds, any agreement that functions as a non-compete or non-solicitation is void as a matter of law. Even if the document is labeled an 'NDA,' if it contains language that restricts the employee's ability to solicit clients or work for competitors, the salary threshold applies.

What Constitutes a 'Low-Wage' Employee?

In Illinois, 'low-wage' is defined by the statutory thresholds mentioned above. If an employee falls below these numbers, they are afforded heightened protection. Employers cannot bypass these protections by simply labeling a contract an 'NDA' rather than a 'Non-Compete.'

Action Item: Verify the annual compensation of all employees currently under restrictive covenants to ensure they meet the statutory minimums for the specific type of restriction imposed.

Drafting Enforceable NDAs in Illinois

To ensure your NDAs remain enforceable, they must be narrowly tailored. Overly broad agreements are frequently struck down by Illinois judges, who may refuse to 'blue-pencil' (rewrite) the contract to make it legal.

Best Practices for Drafting

1. Define Confidential Information Narrowly: Explicitly list what constitutes a trade secret (e.g., specific algorithms, proprietary chemical formulas) rather than using vague terms like 'all information learned during employment.'
2. Exclude General Knowledge: Include a carve-out stating that the NDA does not prevent the employee from using their general skills, knowledge, and experience acquired during their tenure.
3. Specify Duration: While trade secrets can be protected indefinitely, other 'confidential' information should have a reasonable expiration date (typically 1–3 years).
4. Provide Notice: Ensure the employee is given at least 14 days to review the agreement and advised to consult with an attorney.

Key takeaway: The more specific your definition of 'confidential information,' the more likely a court is to uphold the agreement.

Action Item: Review your confidentiality definitions to ensure they do not encompass information that is publicly available or part of the employee's general professional skill set.

The Risks of Non-Compliance

Attempting to enforce an illegal NDA can lead to significant legal exposure. Under the Illinois Freedom to Work Act, employees can sue for damages, including attorney fees and costs, if an employer attempts to enforce a covenant that is known to be illegal. Furthermore, the Illinois Attorney General has the authority to investigate and prosecute employers who engage in a pattern of using illegal restrictive covenants.

TermScore can automatically analyze your current contract templates to identify overly broad confidentiality clauses, non-compete language disguised as NDAs, and compliance gaps regarding Illinois salary thresholds. By using TermScore, you can ensure your agreements are legally sound and enforceable before they are ever signed, saving your organization from costly litigation and regulatory scrutiny.