BEWARE OF THE CHANGES TO RESTRICTIVE COVENANTS
Many employers and employees have had to deal with restrictive covenants in their work contracts at some point. A restrictive covenant is a promise included in an employment contract that restricts one of the parties from taking certain actions. Starting in January 2022, there will be more limitations and restrictions on when employers may use restrictive covenants against Illinois employees.
A common type of restrictive covenant is a non-competition agreement, which prohibits an employee from taking a similar type of job in a certain area surrounding the former employer for a certain time period. For example, a doctor may not be able to work for a different hospital within 40 miles for a year after leaving his or her current hospital. The courts have restricted non-competition and other restrictive covenants in work contracts over the years by limiting the geographic restrictions or the time period the provisions could apply.
Effective January 1, 2022, the Illinois legislature amended the Illinois Freedom to Work Act to further limit the use of restrictive covenants. These changes will affect restrictive covenants in work contracts as of the effective date of the law and will not apply retroactively.
The Illinois Freedom to Work Act (“Act”) originally prohibited employers from using non-competition agreements against “low-wage employees,” which was defined as an employee making less than 1) the applicable federal, state, or local hourly minimum wage; or 2) $13.00 per hour, whichever was greater. Under the updated law, employers will not be able to use restrictive covenants against an employee who is or expected to earn $75,000 or less per year. In addition, an employer cannot use non-solicitation or customer non-solicitation agreements with employees who earn or are expected to earn $45,000 or less per year. Non-solicitation agreements are agreements to not solicit or attempt to persuade customers or clients from leaving one company to follow the employee to another company.
The Act also restates the existing case law for the requirements for non-competition and non-solicitation agreements. Whether or not a non-competition or non-solicitation agreement is ruled invalid by a court depends on various factors in the case, such as 1) if the restrictive covenant protects confidential information; 2) the effect on the general public; 3) the scope of the activities restricted; 4) geographic and durational scope of the restrictions; and 5) the hardship placed on the employee. These are not the only factors the court will consider, but are some of the most common factors. Each case will be different depending on the facts. In addition, employers will be required to give employees 14 days to review the proposed restriction and to advise employees to consult an attorney to review the agreements. For employers, please consult your attorney before January 1, 2022, to review non-competition and non-solicitation agreements for compliance with the updated law. For employees, please consult an attorney to review any non-competition and non-solicitation agreements before signing.
GUARDIANSHIP CHANGES THAT COULD AFFECT THE STRUCTURE OF GUARDIANSHIPS
The Illinois legislature recently amended the law that could change the structures of future guardianships to give more flexibility to guardians to provide for a ward’s best interests.
A guardianship is a court process where an individual (called the guardian) takes custody over another individual (called the ward) and can make decisions regarding a ward’s support, care, comfort, health, education, and maintenance. A guardian of the estate (also called a “conservator”) may also be appointed over the ward, and he or she would be responsible for the ward’s financial matters if it is appropriate. For a guardianship to be ordered, a court must determine that the ward has a disability and lacks the capacity to make responsible decisions regarding his or her care or financial matters because of that disability.
Effective January 1, 2022, the Illinois legislature amended the Probate Act of 1975 (“Act”) to allow appointment of separate individuals to make decisions about a ward’s health, education, and maintenance (guardians of the person), and to make decisions about a ward’s finances (guardian of the estate).
The powers of the guardian are determined by state statute and the court. Guardians also need court approval for additional types of decisions in certain cases. In a recent Illinois Appellate Court case, the Court ruled that the guardian was not statutorily authorized to consent to treatment proposed by the ward’s psychiatrist and objected to by the ward. In that case, the guardian needed to obtain court approval to consent to the treatment on the ward’s behalf. Guardians should consult their attorneys regarding matters that may need court approval and the process for gaining approval for certain decisions.
The recent changes to the Act also include allowing a court to decide if it’s in the best interest of the ward to appoint co-guardians to work together as guardians of the ward’s person or estate. The Probate Act also clarifies that a guardian is entitled to reasonable compensation, subject to court approval.
Persons wishing to establish a guardianship are encouraged to contact an attorney for assistance with the guardianship process and meeting the necessary reporting and accounting duties required of guardians.
THE OPEN AND OBVIOUS RULE COULD HELP PROTECT AGAINST LIABILITY
Landowners have many responsibilities and duties, such as maintaining property and keeping the property safe from dangerous conditions. Landowners often wonder what they could be liable for if someone were to get hurt due to the conditions of the landowner’s property. There are different kinds of duties owed to a person on your property depending on whether that person is a customer, guest, or a trespasser. The duty of care owed to a person will determine the conditions landowners must fix and/or maintain and the conditions that could make the landowner liable to an injured party. In order to help avoid any claims, a landowner should try to fix all conditions that
could cause a person harm.
Unfortunately, sometimes dangerous conditions existing on property do not get fixed before a person is injured. For example, a person may be digging a huge hole to install a pool in their backyard. During the construction, a dinner guest trips and falls in the hole. One may ask what defenses are available to protect oneself in a lawsuit from the guest. In this scenario, the Open and Obvious Dangers doctrine may be applicable. The rule states, “persons or companies that own or control land are not required to foresee and protect against injuries from potentially dangerous conditions that are open and obvious.” This may seem like a common sense rule. In some cases, it may be. However, the facts of a particular case will determine whether a dangerous condition is open and obvious. The courts define “open and obvious” as when the condition and risk are apparent to and would be recognized by a reasonable person exercising ordinary perception, intelligence, and judgment in visiting the area. A reasonable person standard is not based on the actual injured person bringing the suit or the landowner, but it is based on an average person with an average intelligence. The landowner has no duty to warn or protect against the condition if the court determines the condition is open and obvious. However, an open and obvious condition finding does not mean that a landowner is automatically presumed not liable. The court will still consider all of the facts to determine if the landowner owed a duty of care.
There were two recent Illinois Appellate Court cases which discussed whether a condition was “open and obvious.” In Struder v. Central Illinois Scale Company, a manager of an agricultural company sued an independent contractor because the manager fell into an uncovered manhole on a jobsite. The manhole was unmarked and unattended. The court ruled that the manhole was not an open and obvious condition because it was not visible to persons taking the first few steps on the sidewalk. In addition, it was reasonable and foreseeable that persons could have walked over the manhole when it was covered and would not be expecting it to be uncovered. In that case, the contractor was held responsible for the injuries.
In Crespo- Fregoso v. City of Chicago, a resident of Chicago sued the City of Chicago claiming that the city was negligent because it did not maintain a road which contained a pothole. The resident sustained injuries due to falling in the pothole while crossing the drive. The Court in this case ruled that the pothole was an open and obvious condition due to the size of the pothole, that the resident had seen the pothole several times before this incident, and on the day she fell, she saw the ice on the pothole. It depends on the facts in the case whether a court will find that a condition is an open and obvious danger.
Defenses to the open and obvious rule are available in some cases. An attorney can help review a case for the appropriate claims and defenses to assert in a negligence case.
TRANSFER ON DEATH INSTRUMENTS: ANOTHER ESTATE PLANNING TOOL
Wills and trusts are common ways people plan for the transfer of their real estate after death. However, wills and trusts are not the only estate planning tools for transferring real estate after death. A Transfer on Death Instrument (“TODI”) may be used to transfer a person’s real estate to recipient(s) of their choosing upon death and possibly avoid going through probate. As with wills and trusts, there are benefits and limitations with using these documents.
TODIs were originally limited to certain types of property and did not allow a lot of flexibility for individuals. However, the Illinois legislature made significant changes to the Illinois Residential Real Property Transfer on Death Instrument Act (hereinafter referred to “Act”), which may give some individuals another tool for their estate planning. The changes described below will be effective January 1, 2022.
One of the most significant changes is that the Act now allows any type of real estate to be transferred. Previously, the Act only applied to residential real estate. Now individuals can use a Transfer on Death Instrument to transfer commercial or agricultural property. Another significant change is that the beneficiary of the Transfer on Death Instrument may be a trust if the trust is in existence when the TOD instrument is signed. This allows greater flexibility with different distributions. For example, a trust can contain provisions to allow an individual, such as a spouse or child, to live in the property for a certain time period. In addition, a trust can contain a right of first refusal for a certain individual to have the first chance to buy the property. However, a TODI is limited to real estate and may not be used to transfer personal property. Therefore, people may be advised to have both a Will and a TODI to effectively distribute their assets at death. If a person has significant other assets and multiple real estate properties, a revocable trust may also be a good option.
An attorney is required to draft a Transfer on Death Instrument. An attorney can evaluate your specific circumstances to determine which estate planning vehicle(s) may be best for you depending on your assets, debts, and goals.
Attorney Bridget C. Trainor has joined the Freeport Community Public School Fund Board. Bridget is excited for the opportunity to contribute her ideas and knowledge to help support the enrichment of education of the Freeport School District.
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