For employers operating in Illinois, the settlement between the Illinois Attorney General and Equinox Holdings, Inc. is among the most significant restrictive covenant developments of 2026. While much of the attention surrounding non-competes has focused on legislative reforms and private litigation, the Equinox matter makes clear that Illinois regulators are scrutinizing employers' restrictive covenant practices and are willing to pursue substantial penalties for alleged violations of the Illinois Freedom to Work Act (IFWA).

On October 9, 2026, Attorney General Kwame Raoul announced a $1.9 million settlement that resolved an investigation into Equinox's use of non-compete and non-solicitation provisions with Illinois employees. The attorney general alleged that Equinox included non-compete agreements and non-solicitation restrictions with employees whose "actual or expected annualized rates of earnings were under $75,000 and $45,000 respectively," below the statutory thresholds established by the IFWA. The complaint further alleged that Equinox failed to provide employees with the required 14-day review period and failed to advise employees in writing of their right to consult counsel before signing the agreements.

In the settlement, Equinox agreed to pay $910,000 in civil penalties and $990,000 in restitution. In addition, Equinox agreed to bring its agreements and practices into compliance with Illinois law and provide training regarding the IFWA's requirements for post-employment covenants.

The Most Important Takeaway for Employers

The settlement’s significance lies not just in the underlying allegations, but in the attorney general's willingness to pursue enforcement based on the existence of allegedly unlawful agreements.

Historically, restrictive covenant disputes most often arose when an employer sought to enforce a restrictive covenant against a departing employee. In the Equinox matter, however, there were no allegations that Equinox actually enforced the challenged restrictions. Instead, the attorney general focused on the company's use of agreements that allegedly failed to comply with the IFWA.

That distinction is significant. If Illinois regulators continue to take this enforcement-oriented approach, employers face potential exposure not only when seeking to enforce restrictive covenants, but also when merely maintaining, distributing, or requiring agreements that do not satisfy the statute's requirements. The risk is no longer limited to the loss of an injunction in private litigation. It now includes the possibility of a government investigation, restitution, civil penalties, and mandated compliance measures.

It is particularly noteworthy that the attorney general pursued relief notwithstanding Equinox's position that it never sought to enforce the challenged restrictions and had previously notified affected employees that the provisions would be treated as null and void. Employers should not assume that corrective action alone will eliminate potential exposure arising from the prior use of non-compliant agreements.

A Compliance Audit Should Be a Priority

The Equinox settlement underscores that Illinois employers should evaluate more than the substantive scope of their restrictive covenants. A comprehensive compliance review should confirm:

• Whether employees subject to non-compete or non-solicitation restrictions satisfy the applicable earnings thresholds.
• Whether agreements contain all disclosures required by the IFWA.
• Whether employees are advised in writing of their right to consult counsel.
• Whether employees receive the statutorily required review period before signing agreements.
• Whether legacy agreements remain in circulation.
• Whether onboarding and recruiting personnel understand and consistently follow statutory procedures.
• Whether template agreements reflect current IFWA requirements and compensation thresholds.

Looking Ahead

The Equinox settlement is a reminder that restrictive covenant compliance now involves more than questions of enforceability. For employers operating in Illinois, the issue now involves both enforceability and regulatory compliance risk. As state attorneys general and other regulators continue to focus on employee mobility and workplace rights, employers should assume that restrictive covenant practices may be scrutinized even in the absence of litigation.

Illinois employers should view the Equinox settlement as more than an isolated enforcement action. Rather, it provides a clear indication that Illinois regulators are prepared to scrutinize restrictive covenant programs proactively and pursue substantial remedies for alleged violations of the IFWA. Employers that have not recently reviewed their restrictive covenant agreements, onboarding procedures, and compliance practices should consider doing so now, before those practices become the subject of regulatory scrutiny.

If you have questions, please contact your UBG attorney or Chris Pickett at cpickett@ubglaw.com.

The information provided in this alert reflects the information and guidance we have available as of the date of publication and is subject to change. This legal update was prepared by UB Greensfelder LLP and is not intended as a substitute for professional legal advice, nor does it create an attorney-client relationship.