Illinois Resignation Law: Final Paycheck, PTO Payout, Non-Compete

Final paycheck: 820 ILCS 115/5

Section 5 of the Illinois Wage Payment and Collection Act (820 ILCS 115/5) requires that all final compensation be paid in full at the time of separation if possible, but in no event later than the next regularly scheduled payday for the period during which separation occurred.

Late payment entitles you to the unpaid final compensation plus damages of 5% of the underpayment for each month it stays unpaid, accruing without limit until you are paid, along with attorney's fees and costs in a successful private action. If an employer ignores an Illinois Department of Labor demand or order, further penalties apply: 1% of the underpayment per day to the employee and 20% to the Department. Wage claims must be filed with IDOL within one year of the wages becoming due; private litigation under longer limitation periods is also available.

PTO payout: vacation is wages

Section 5 of the Wage Payment and Collection Act explicitly includes accrued vacation in "final compensation," and the Act expressly bars any employment contract or policy from providing for the forfeiture of earned vacation at separation. The 2024 Illinois Paid Leave for All Workers Act added a layered floor of paid leave for all Illinois workers, although the payout-at-separation rule for that statutory leave is policy-dependent.

Cap-on-accrual policies (capping at 1.5x or 2x annual entitlement) are permissible. Use-it-or-lose-it policies that zero out vacation at year-end are commonly held unenforceable in Illinois. Use-it-or-lose-it at separation specifically is not enforceable under section 5.

Non-compete: Illinois Freedom to Work Act

The Illinois Freedom to Work Act (820 ILCS 90) was substantially amended effective 1 January 2022 to restrict non-competes. Under the amended Act:

• Non-competes are void as to employees earning $75,000 or less per year (indexed upward, $80,000 for 2027 under the statute).
• Non-solicit clauses are void as to employees earning $45,000 or less per year (also indexed).
• Above the threshold, non-competes must be supported by adequate consideration (the statute defines adequate consideration as 2+ years of continued employment after signing, or other sufficient professional or financial benefits).
• Non-competes against COVID-related laid-off workers and against independent contractors paid below specified thresholds are void.

Employers must give 14 days to review a non-compete before signing and advise the employee in writing of the right to consult counsel. Failure to comply renders the clause unenforceable.

Unemployment after voluntary quit

Illinois Department of Employment Security (IDES) disqualifies most voluntary quits from unemployment benefits, with a well-developed body of good-cause caselaw. Good cause attributable to the employer (substantial reduction in pay, change in duties, hostile workplace, unsafe conditions, employer breach of agreement) is the most reliable basis. Personal medical reasons with documentation can qualify. The IDES Adjudication Manual gives a usable list of examples.

Practical Illinois exit checklist

• Final paycheck (including accrued vacation) is due on the next regular payday after separation under 820 ILCS 115/5.
• Confirm payout of all earned vacation. Use-it-or-lose-it at separation is unenforceable.
• Check your salary against the Freedom to Work Act thresholds. If you earn $75,000 or less, your non-compete is void by statute.
• File any wage claim with IDOL within one year of the wages becoming due, or pursue private litigation under the longer limitation periods.