Category Archives: Illinois Equal Pay Act

Will Employers Have to Give 1% of their Total Gross Profits to the State of Illinois? Gov. Pritzker Signs into Law Unprecedented Changes to IL Equal Pay and Corporate Laws

Contributed by Jeff Risch, March 23, 2021

Private employers in Illinois now have more landmines to navigate as the state’s legislature pushed through SB1480 during its most recent “lame duck” session.  Gov. Pritzker just signed the legislation into law today!  While there are many substantive provisions and amendments to various laws contained in SB1480 (including new restrictions on the use of criminal convictions as we blogged about previously), the law also amends the Illinois Business Corporation Act (IBCA) and the Illinois Equal Pay Act (IEPA); resulting in unprecedented compulsory reporting of race, gender and ethnicity statistics and related pay data.  These changes are part of a new national trend (see our previous blog on CA’s new law), while the Biden Administration begins to review similar pay data reporting mandates.

Amendments to the IBCA

Under the IBCA, private corporations who are required to file an Employer Information Report EEO-1 with the Equal Employment Opportunity Commission (EEOC) will have to submit substantially similar data they report under Section D of the EEO-1 report — in a format to be approved by the IL Secretary of State (SOS) — as part of their annual corporate filing with the SOS.  For any corporation that must submit EEO-1 related data to the state, the SOS will then publish the corporation’s data on gender, race and ethnicity on the SOS’s  official website.  This new mandate is set to be in place for any and all annual corporate filings with the State of Illinois beginning on and after January 1, 2023. Employers who fail to comply with the new IBCA mandates will not be authorized to conduct business in Illinois and/or will have their status as a corporation involuntarily dissolved. 

Amendments to the IEPA

The changes to the IEPA are much more complex and employers who are not intimately familiar with Illinois’ unique Equal Pay Act law are playing with fire.  Private employers with 100+ employees within the State of Illinois must certify their equal pay compliance (including, demonstrating how they actually comply) and provide pay data information to the IDOL.  Employers who fail to comply with the IEPA certification mandates or provide false information to the IDOL will result in a non-discretionary fine of 1% of their annual gross profits

As a reminder, the IEPA generally applies to all employers with employees working in the state.  The state law is also materially different than the federal law in many aspects, including, but not limited to: the fact that any pay disparity is reviewed on a county level (not facility); encompasses African American status in addition to gender; limits the defenses available to employers trying to justify pay disparities; broadens what “equal” means by utilizing a “substantially similar” standard; and prohibits inquiry into salary/wage history. 

The amendments under SB1480 applies to any PRIVATE employer with more than 100 employees in the state. These employers will have to obtain an Equal Pay Registration Certificate from the IDOL within 3 years from the effective date of the new law (today, March 23, 2021) and must recertify every 2 years thereafter.  These businesses will be required to apply for an equal pay registration certificate by paying a $150 filing fee and submitting an equal pay compliance statement to the IDOL.  In addition to submitting their most recently filed EEO-1 report for each county in which the business has a facility or employees, they will also need to compile a list of all employees during the past calendar year (separated by gender and the race and ethnicity categories), and report the total wages paid to each employee during the past calendar year. The IDOL will then issue an equal pay registration certificate to these employers, who must also submit a statement signed by a corporate officer, legal counsel, or authorized agent of the business that confirms the following: 

  • that the business is in compliance with the Title VII of the Civil Rights Act of 1964, the Equal Pay Act of 1963, the Illinois Human Rights Act, the Equal Wage Act, and the Equal Pay Act of 2003;
  • that the average compensation for its female and minority employees is not consistently below the average compensation for its male and non-minority employees within each of the major job categories in the Employer Information Report EEO-1; 
  • that the business does not restrict employees of one sex to certain job classifications and makes retention and promotion decisions without regard to sex;
  • that wage and benefit disparities are corrected when identified to ensure compliance with applicable anti-discrimination laws; and
  • that the business identifies how often wages and benefits are evaluated to ensure such compliance.

The equal pay compliance statement must also indicate whether the business, in setting compensation and benefits, utilizes:

  • a market pricing approach;
  • state prevailing wage or union contract requirements;
  • a performance pay system;
  • an internal analysis; or
  • an alternative approach to determine what level of wages and benefits to pay its employees. If the business uses an alternative approach, the business must provide a description of its approach.

The issuance of a registration certificate will not serve as a defense against any IEPA violation found by the IDOL, nor a basis for mitigation of damages.  The certification can also be suspended or revoked by the IDOL at any time.

While the pay data submitted to the IDOL will be considered private for the IDOL’s eyes-only, the IDOL’s decision to issue, not issue, revoke, or suspend an equal pay registration certificate will be public information.

There are also new anti-retaliation provisions in the amendments that make it financially painful for any employer found to have taken adverse action against an employee for engaging in protected activities under the IEPA.  But, that’s not all… the legal burden is now placed on the employer to prove, by clear and convincing evidence, that it would have taken the same unfavorable personnel action in the absence of any protected conduct.  

What Employers Must Do Moving Forward:

  • Review and, if necessary, modify equal pay policies that demonstrate a commitment to IEPA compliance.
  • Audit equal pay compliance annually. This includes creating strong/reliable compensation systems that are in line with the law (base wage, benefits, commission programs and bonus opportunities).
  • Update job descriptions annually.  Focus not only on job titles, but the actual duties, responsibilities and qualifications of the position.
  • Evaluate performance reviews.  ***These continue to be the “kiss of death” for many employers since very few evaluators are willing to be honest and direct.
  • Consider partnering with credible 3rd parties to help design and implement compensation systems in order to comply with all applicable anti-discrimination laws.

Following a National Trend, Illinois’ Equal Pay Act Now Bars Employers from Asking Job Applicants about Their Salary History

Contributed by Michael Faley, August 5, 2019

33186296 – wage gap concept with blue figure symbolizing men and red pawn women

With much fanfare, Illinois Governor J.B. Pritzker signed into law major amendments to the Illinois Equal Pay Act (IEPA) that now bar Illinois employers from asking job applicants or their prior employers about salary, wages or benefits history. On average, women in Illinois are paid only 79% of what men receive, according to information recently released from Gov. Pritzker’s office. Gov. Pritzker and Illinois legislators hope that the IEPA amendments will help correct the disparity. Gov. Pritzker told a crowd at the recent signing ceremony that “[w]e are declaring that one’s history should not dictate one’s future, that no person should be held back from earning their true value because of how much money they were paid in a previous job.” The new measure takes effect on September 29, 2019.

Since 2017, laws that prohibit questions about salary history have quickly spread nationwide. Variations on the ban are now or soon will be in effect in 17 states and 18 major municipalities, including California, New York, Colorado, Alabama, Washington, Cincinnati, Louisville, San Francisco, and New York City among others. In comparison, Wisconsin and Michigan have gone in the other direction and banned the ban, so to speak, by restricting the ability of local governments to impose rules that would otherwise limit an employer’s right to ask about compensation history.           

Parting ways with its neighbors, Illinois will prohibit employers from asking job applicants or their current/former employers about salary, wages or benefits history. Also, employees cannot be compelled to sign a contract or waiver that would prohibit the employee from disclosing or discussing information about their salary, wage or benefits. Employers violating the law could face a lawsuit that permits the employee to recover any damages incurred, “special damages” up to $10,000, injunctive relief, as well as costs and attorney’s fees. The law further contains a looming risk of separately imposed civil penalties up to “$5,000 for each violation for each employee affected.”

Employers are certainly free to provide salary and benefit information about a position and discuss salary expectations with job candidates. Job candidates can also voluntarily provide salary history, but the employer cannot take it into account in making employment or compensation decisions.  

In yet another significant change found in the recent IEPA amendments, the law now prohibits sex-based discrimination on pay (or, pay disparity due to being African American) where employees are performing substantially similar work on jobs requiring “substantially similar skill, effort, and responsibility.” The old version applied to comparable jobs that required “equal skill, effort and responsibility.” As such, the standards for bringing a claim have loosened to a degree. At the same time, the amendments have further tightened the exceptions that permit pay differences in some limited circumstances.

In light of the IEPA amendments, employers should carefully review their payroll data.  Remember, under the IEPA, pay disparity is analyzed on a county level and not based on the facility, site or office the employee is primarily assigned.  Hiring forms and policies should also be reviewed.  Recruiting and interviewing practices need to be examined as well.  Of course, it’s always advisable to consult with your legal counsel to help get “it” right.

Breaking News! Illinois Senate Refuses to Override Governor’s Veto

Inquiry into Illinois Applicant’s Salary Inquiry Remains Lawful – For Now.

Contributed by Noah A. Frank, November 9, 2017

gavelWe previously reported that Governor Rauner’s August 25, 2017 veto of HB 2462 amending the Illinois Equal Pay Act related to applicant salary history inquiries was subject to be overridden by the General Assembly.  On October 25, 2017, as predicted, the Illinois House voted to override the veto by a vote of 80-33 (less than the initial vote of 91-24 to pass the bill).  On November 9, 2017, the Illinois Senate voted against overriding the veto.  While 29 senators favored overriding the veto, they were seven short of the 36 required to override the veto (and still less than the original 35 to vote to pass the bill).

The battle is not over. 

In his veto, Governor Rauner suggested that the General Assembly adopt legislation similar to another state’s law.  As such, employers should expect legislation in 2018 in line with this new national trend, and prepare to revise job applications and interview questions accordingly.  We will keep you abreast of future Illinois and national developments.

UPDATED: California Bans Applicant Salary History Inquiries

Contributed by Noah A. Frank, November 8, 2017

Add salary history to the growing list of topics that may be off limits on employment applications and during interviews, depending on where your business operates.

32420632 - law gavel on a stack of american moneyCalifornia joins a growing list of jurisdictions banning salary history inquiries. On October 12, 2017, California Governor Brown signed Assembly Bill 168, which prohibits employers from seeking or relying upon applicants’ salary history and using such information as the basis for establishing compensation. The new law takes effect on January 1, 2018.

Like ban-the-box legislation (banning inquiries into criminal conviction history) and sick leave ordinances, this is likely the start of a national trend enacted on a jurisdiction-by-jurisdiction piecemeal basis.  California joins Massachusetts, Oregon, and Delaware, along with several municipalities, such as New York City, Philadelphia, Pittsburgh, and U.S. territory Puerto Rico, to enact such legislation in an emerging national trend.  Indeed, since we reported on Illinois’s forestalled HB1462 amending the Equal Pay Act in September, the Illinois House has overridden the governor’s veto, and the bill is on its way to the Illinois Senate for similar consideration.

The Basics

Like the other jurisdictions’ laws, California’s legislation is meant to remedy past gender-based compensation discrimination.  However, given the broad language, this bill will apply to all protected classes such as (and not limited to) race, religion, military status. Under AB-168, all employers in the state of California:

  1. May not inquire directly or indirectly into an applicant’s compensation and benefits (unless publicly available as provided by other laws).
  2. May not rely on salary history as a factor in determining whether to offer employment to an applicant or what salary to offer an applicant.
  3. Must provide the pay scale for the position to an applicant applying for employment “upon reasonable request.”  Note that this is a fairly unique provision in California’s law (at least for now).
  4. May not allow prior salary alone to justify any disparity in compensation.

Notably, if an applicant “voluntarily and without prompting discloses” compensation history, the employer may then consider it as a factor in determining the salary to offer an applicant.

Compliance Made Easy

In light of these trends in the workplace, employers must ensure that they are compliant with new and emerging laws as enacted, and to also perform routine audits – including employment forms, handbooks, policies, and templates.  As it relates to these salary inquiry laws, employers should (1) ensure job applications are compliant and do not include salary/wage inquiries, and (2) review interview questions, especially “scripts” used by management, and ensure that those conducting interviews are aware of the new unlawful inquiry.

What’s the Bottom Line on Salary History Inquiry Bans? Don’t Ask.

You may not ask applicants “how much do you currently make?” But you may ask: “how much would you like to earn in this position?” or “What are your compensation expectations?” or other similar future-oriented inquiries.

Salary History Inquiry Bill Down But Far From Out

Contributed by Noah A. Frank, September 19, 2017

wage

On June 28, 2017, HB 2462, an amendment to the Illinois Equal Pay Act, passed both chambers of Illinois General Assembly. The bill would have made an employer’s inquiry into an applicants’ wage, benefits, and other compensation history an unlawful form of discrimination. Even worse for Illinois employers, the bill would allow for compensatory damages, special damages of up to $10,000, injunctive relief, and attorney fees through a private cause of action with a five (5) year statute of limitations.

On August 25, 2017, Governor Rauner vetoed the bill with a special message to the legislature that, while the gender wage gap must be eliminated, Illinois’ new law should be modeled after Massachusetts’s “best-in-the-country” law on the topic, and that he would support a bill that more closely resembled Massachusetts’ law.

The bill, which passed 91 to 24 in the House, and 35 to 18 in the Senate, could be reintroduced as new or amended legislation following the Governor’s statement, or the General Assembly could override the veto (71 votes are needed in the House, and 36 in the Senate, so this is possible) with the current language.

Why is this important?

With the Trump Administration, we have seen an increase in local regulation of labor and employment law. This means that employers located in multiple states, counties, and cities must carefully pay attention to the various laws impacting their workforces. Examples of this type of “piecemeal legislation” we have already seen in Illinois and across the country include local ordinances impacting minimum wage, paid sick leave, and other mandated leaves. Additionally, laws that go into effect in other jurisdictions may foreshadow changes at home as well (e.g., Illinois’s governor pointing towards Massachusetts’s exemplary statue).

Had it become law, this amendment would have effective required employers to keep applications and interview records (even for those they did not hire) for five years to comply with the statute of limitations for an unlawful wage inquiry (the Illinois Equal Pay Act already imposes a five year status of limitations for other discriminatory pay practices). By contrast, under Federal law, application records must be kept for only one year from the date of making the record or the personnel action involved (2 years for educational institutions and state and local governments).

What do you do now?

While the law has not gone into effect as of the date of this blog, it is likely that some form of the salary history amendment will ultimately become law in Illinois. Businesses should carefully review their job applications, interview questions, and related policies to avoid inquiries that may lead to challenges in the hiring process.

Additionally, record retention (and destruction!) policies should be reviewed for compliance with these and other statutes – as well as to ensure data integrity and security.

Finally, seek the advice of experienced employment counsel for best practices in light of national trends to remain proactive with an ounce of prevention