Procedures For Terminating the Agreement
None, unless specified in a collective bargaining agreement or other agreement with the employee.
Illinois is an “at-will” employment state, meaning that unless otherwise expressly agreed by the parties, both the employer and the employee retain the mutual right to terminate the employment relationship at will, for any reason, with or without cause and with or without warning or notice.
Employees may terminate the employment relationship by resigning, with or without notice.
Termination On Notice
Unless otherwise agreed by the parties, no termination notice is required, except in plant closing or mass layoff situations that trigger 60-day prior notice requirements under federal and/or state law.
Termination By Reason Of The Employee's Age
Discrimination based on age is prohibited except in very limited circumstances usually involving professions related to public safety. The parties may contractually agree to a mandatory retirement age.
Automatic Termination In Cases Of Force Majeure
Employment agreements may be terminated in cases of force majeure; however, such instances are exceedingly rare.
The Worker Adjustment and Retraining Notification Act (the “WARN Act”) requires “employers” (as that term is defined by the statute) which are planning a “plant closing” or a “mass layoff” to give affected employees at least 60 days’ notice of such an employment-related action. The Illinois “mini-WARN” statute applies to any business enterprise that employs 75 or more employees, excluding part-time employees; or 75 or more employees, including part-time employees who in the aggregate work at least 4,000 hours per week (exclusive of overtime hours).
The WARN Act states that “an employer shall not order a plant closing or mass layoff until the end of a 60-day period after the employer serves written notice of such an order.” Therefore, an employer which is anticipating carrying out a plant closing or mass layoff is required to give notice to affected employees or their representatives, the State Dislocated Worker Unit, and the chief elected official of a unit of local government. Notice must be given at least 60 calendar days prior to any planned plant closing or mass layoff, and there are specific items that the notice must contain. If the closure date is uncertain, certain requirements for providing updated notice must be provided. Failure to provide the required WARN Act notice can result in significant liabilities to the employer, including back wages and benefits for the 60 day notice period, as well as penalties of $500 per day for failing to provide notice to state and local officials.
Termination By Parties’ Agreement
The parties are free to agree to terminate the employment relationship on any grounds they wish except for discriminatory reasons prohibited by federal or state law or contrary to public policy.
Directors Or Other Senior Officers
In the case of a director, termination of the employment relationship does not automatically end the board membership. Separate steps as required by the company’s articles of incorporation are required to end the directorship.
Special Rules For Categories Of Employee
Prior notice may be required if plant closing or mass layoff notice requirements are triggered.
Specific Rules For Companies in Financial Difficulties
An employer’s obligation to its employees continues, and may take priority over claims by its other creditors, during times of financial difficulties.
Restricting Future Activities
Illinois courts will review an employer’s restrictions on employees’ future activities to ensure that they are no more reasonable than necessary, supported by adequate consideration (whether entered into at the beginning of employment which continues for at least two years or through additional consideration provided during or at the end of employment), do not impose undue hardship on the employee, are not injurious to the public, and narrowly tailored to protect the employer’s legitimate business interests. Each case will be considered individually, so restrictions that may be appropriate for one employee’s circumstances may be found unreasonable for other employees.
Under the Illinois Freedom to Work Act (“IFWA”), any employment agreements entered into after January 1, 2017, with any “low wage” employees may not include any restrictive covenants. “Low wage” is defined currently as employees who make less than the prevailing federal, state, or local minimum wage, or $13.00 per hour, whichever is greater. However, under new amendments to the IFWA which await the governor’s expected signature into law as of this date, the minimum income threshold for application of the prohibitions on post-employment non-competition restrictions increases to $75,000 annual income effective January 1, 2022 (with regular increases thereafter: $80,000 effective January 1, 2027, $85,000 effective January 1, 2032, and $90,000 effective January 1, 2037). The IFWA amendments include a similar increase to the “low wage” definition for application of the prohibitions on employers’ use of non-solicitation covenants ($45,000 effective January 1, 2022, $47,500 effective January 1, 2027, $52,000 effective January 1, 2032, and $52,500 effective January 1, 2037).
The IFWA amendments also prohibit an employer’s enforcement of restrictive covenants against employees who are terminated as a result of circumstances related to the COVID-19 pandemic or similar circumstances (with limited exceptions), who are covered by a collective bargaining agreement, or who are employed in certain industry positions. Employers also must advise employees in writing of their right to consult with an attorney and provide at least 14 days to consider the restrictive covenant agreement prior to it taking effect. Employees who prevail in litigation brought by the employer to enforce a non-compliant restrictive covenant may recover attorneys’ fees and costs and additional relief.
The IFWA amendments will not apply retroactively to restrictive covenant agreements entered into prior to January 1, 2022. Employers should review and amend all restrictive covenants intended to be signed with employees after January 1, 2022, to ensure compliance with the new requirements.
Under the Illinois Whistleblower Act, employers may not have policies that prohibit or otherwise retaliate against an employee who discloses information in a court or administrative hearing, before a legislative commission or committee, or in any other proceeding, or to a government or law enforcement agency, where the employee has reasonable cause to believe that the information discloses a violation of a State or federal law, rule, or regulation. Violations may subject employers to civil penalties and to damages that may be awarded in an employee’s private legal action.
Other Illinois employee protection laws also have whistleblower or anti-retaliation provisions which prohibit retaliation against employees for making certain disclosures or for refusing to participate in specified activities (e.g., Illinois Human Rights Act, Illinois Workers’ Compensation Act, etc.).
Special Rules For Garden Leave
None. Illinois does not have any laws recognizing the concept of “Garden Leave.”
Severance payments are not required unless specifically provided by the employer’s severance policy, a collective bargaining agreement, or the parties’ employment agreement. Federal law provides requirements for the terms of a valid release agreement related to severance payments.
Special Tax Provisions And Severance Payments
Severance payments are subject to ordinary income, social security, and other employment taxes.
Allowances Payable To Employees After Termination
Employers must contribute to the State unemployment compensation fund.
Time Limits For Claims Following Termination
Statutes of limitations for filing claims after termination vary depending on the type of claim. Wage payment claims may be subject to a 10 year statute of limitations. Charges of discrimination must be filed with the Department of Human Rights within 300 days of the disputed action.