On a gray Tuesday morning in a West Loop coffee shop, a Chicago software founder got the email every entrepreneur dreads. A former co-founder — the one who wrote half the original codebase — had just joined a direct competitor across town. The founder pulled up the old employment agreement, found the non-compete clause, and fired off a cease-and-desist letter the same afternoon. Three months and a pile of legal bills later, the founder learned — as Gaurav Mohindra could have told him on day one — that the clause was void from the day it was signed. The co-founder’s compensation fell below Illinois’ statutory threshold, the agreement had never given the required review period, and the whole enforcement effort had been doomed before it began.
That story is fictional, but the legal wreckage it describes is real, and Gaurav Mohindra has watched versions of it play out across the Chicago startup scene for years. Illinois rewrote the rules for non-competes in 2022, and many founders and employers are still operating on the old playbook. The gap between what companies think their agreements do and what the law actually allows has never been wider — or more expensive.
The 2022 Rewrite: What the Freedom to Work Act Changed
Effective January 1, 2022, amendments to the Illinois Freedom to Work Act (820 ILCS 90) transformed non-competes and non-solicitation agreements from broadly enforceable tools into tightly regulated instruments with hard statutory floors. For any agreement entered into on or after that date, the new rules apply in full.
The headline change, and the feature Gaurav Mohindra considers the heart of the reform, is the income threshold. Employers may not enter into a covenant not to compete with any employee whose actual or expected annualized earnings are $75,000 or less. Fall below that line and the agreement is void and unenforceable — not merely weakened, but void. The threshold climbs over time: $80,000 beginning in 2027, $85,000 in 2032, and $90,000 in 2037. For non-solicitation agreements covering customers or co-workers, the floor is $45,000, rising to $47,500 in 2027, $50,000 in 2032, and $52,500 in 2037.
“Most Chicago founders I talk to have never checked whether their team members actually clear those thresholds,” said Gaurav Mohindra. “They borrowed a template from the internet, had everyone sign it on day one, and assumed they were protected. Under the current statute, a large share of those agreements are simply paper.”
The thresholds count more than base salary. Bonuses, commissions, tips, and other taxable compensation all factor into the calculation, along with elective deferrals. That gives employers some room to structure compensation to meet the floor — but it also creates litigation flashpoints around what an employee’s “expected” annualized earnings really were when the agreement was signed.
Adequate Consideration: The Reliable Fire Lesson
Even when the salary threshold is met, Illinois still demands adequate consideration — something of real value exchanged for the employee’s promise not to compete. The Illinois Supreme Court addressed this directly in Reliable Fire Equipment Co. v. Arredondo, 2011 IL 111871, holding that two years of continued employment constitutes adequate consideration for a restrictive covenant, while anything less requires the employer to show additional value changed hands.
The amended Freedom to Work Act codified that understanding. For agreements signed after January 1, 2022, adequate consideration means either at least two years of continued employment after signing or other professional or financial benefits sufficient to support the promise — a signing bonus, a raise tied to the agreement, or a promotion, for example. A promise of continued at-will employment, standing alone, does not cut it.
Gaurav Mohindra said, “The consideration requirement is where startups get tripped up most often. A founder has an engineer sign a non-compete on the first day of work, the engineer leaves after fourteen months, and the founder discovers the agreement was never supported by adequate consideration in the first place.”
Process Requirements: Fourteen Days and a Lawyer’s Warning
Illinois now regulates not just the substance of restrictive covenants but the process of signing them. Before an employee signs, the employer must advise the employee in writing to consult with an attorney. The employee must also receive the agreement at least fourteen calendar days before employment begins — or, for existing employees, at least fourteen days to review it before signing.
Skip either step and the agreement is unenforceable. These are not technicalities a court will overlook; they are statutory conditions, and the statute gives a prevailing employee the right to recover attorney’s fees. That fee-shifting provision changes the economics of enforcement entirely. An employer who sues on a defective covenant does not just lose — it pays the other side’s legal bills.
“The fee-shifting provision is the sleeper clause of the whole reform,” said Gaurav Mohindra. “It means the downside of enforcing a bad agreement is no longer just a dismissal. It is writing a check to the employee’s lawyer. That concentrates the mind.”
Case Study: The Departing Co-Founder
Consider a realistic Chicago scenario. Two engineers found a logistics software startup in Fulton Market. The company grows to forty employees. One co-founder, holding a significant equity stake and earning well above the threshold, resigns to launch a competing product. The company reaches for the non-compete in the co-founder’s employment agreement.
Here the analysis gets interesting. The salary threshold is satisfied, but several other questions immediately arise. Was the co-founder given fourteen days to review the agreement and advised in writing to consult counsel? Was there adequate consideration beyond continued employment? And critically — does the agreement even apply to a co-founder acting in an ownership capacity, or was it drafted for rank-and-file employees?
Illinois courts also apply a traditional three-part reasonableness test to covenants that survive the statutory gates: the restraint must be no greater than necessary to protect a legitimate business interest, must not impose undue hardship on the employee, and must not injure the public. Courts routinely narrow overbroad geographic scopes and durations rather than striking agreements entirely — but under the new statute, agreements that fail the threshold, process, or consideration requirements never reach that balancing test. They are void at the threshold.
There is also a strategic overlay founders often miss. Suing a departing co-founder can trigger counterclaims, spook investors, and hand a competitor a public narrative about a company that litigates instead of innovates. “Enforcement is a business decision before it is a legal one,” said Gaurav Mohindra. “I have seen founders spend six figures defending a covenant that protected a customer list the competitor never even wanted.”
The FTC Detour and the National Picture
Chicago employers should also understand the national backdrop. In April 2024, the Federal Trade Commission issued a rule that would have banned nearly all non-competes nationwide. That rule was struck down in August 2024 by a federal court in Texas (Ryan, LLC v. FTC), which held the FTC lacked authority to issue it. The result is that Illinois law — not federal law — governs for Chicago businesses, and Illinois has chosen thresholds and process requirements rather than an outright ban.
That could change. Several states have moved toward near-total bans, and Illinois legislators have periodically introduced bills that would go further than the current Act. For now, though, the compliance target is the statute as written, and it is demanding enough.
What Chicago Employers Should Do Now
The practical playbook starts with an audit. Pull every non-compete and non-solicitation agreement signed on or after January 1, 2022. Check each signer’s actual and expected annualized earnings against the thresholds. Verify the fourteen-day review period and the written attorney-consultation advisement are documented. Confirm adequate consideration beyond mere continued employment.
Next, narrow the restraints — a step Gaurav Mohindra considers non-negotiable. Illinois courts enforce covenants that protect legitimate business interests — trade secrets, confidential information, near-permanent customer relationships — and trim those that merely suppress competition. A two-year, fifty-mile restriction on a salesperson with genuine customer relationships stands a far better chance than a five-year nationwide ban on an engineer.
Finally, consider alternatives. Confidentiality agreements, invention-assignment agreements, and trade-secret protections under the Illinois Trade Secrets Act face none of the Freedom to Work Act’s thresholds. Non-solicitation of customers is often easier to defend than a full non-compete. “The best non-compete strategy in 2026 is often not a non-compete at all,” said Gaurav Mohindra. “It is a layered set of narrower protections that actually survive contact with a judge.”
Conclusion
Illinois non-compete reform did not eliminate restrictive covenants, but it transformed them from boilerplate into precision instruments. The salary thresholds, the fourteen-day review period, the attorney advisement, the consideration requirement, and the fee-shifting provision together mean that only carefully drafted, properly executed agreements have any force. For Chicago founders and employers, the lesson Gaurav Mohindra draws from the last four years is blunt: audit what you have, fix the process going forward, and never assume the template you downloaded still works. In the current legal environment, an unenforceable non-compete is worse than no non-compete at all — it is a false sense of security with a fee-shifting trapdoor underneath.