Tag Archives: Illinois Business Corporation Act (IBCA)

More Tweaks to the IL Equal Pay Act

Contributed By Beverly Alfon, July 1, 2021

On June 25, 2021, Governor Pritzker signed into law additional amendments to the IL Equal Pay Act of 2003. 

March 2021 Amendments (Recap)

As outlined in our March 23, 2021 blog article, 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, the March amendments to the Act require businesses with 100 or more employees to obtain certification of compliance with the Equal Pay Act from the IL Department of Labor (IDOL).

The certification process requires employers to submit an application that contains a statement affirming compliance with the equal pay principles set forth in Title VII of the Civil Rights Act, the Equal Pay Act of 1963, the IL Human Rights Act, the Equal Wage Act, and the IL Equal Pay Act of 2003. Specifically, the statement must be signed by an officer or agent of the business and confirm the following representations: 

  • The average compensation for the business’s female and minority employees is not consistently below the average compensation for its male and non-minority employees within major job categories when accounting for various distinguishing factors;
  • The business does not restrict employees of one sex to certain job classifications and makes retention and promotion decisions without regard to sex;
  • The wage and benefit disparities are corrected when identified to ensure compliance with applicable anti-discrimination laws; and

In addition, employers who are required to file a federal EEO-1 report must also include a copy of their most recent EEO-1 report.

June 2021 Amendments

Deadline:  Employers subject to the certification requirement as of March 23, 2021, must apply to obtain an equal pay registration certificate between March 24, 2022, and March 23, 2024. Covered employers that obtain authorization to do business in Illinois after March 23, 2021, must apply for certification within 3 years of commencing operations, but not sooner than January 1, 2024. Recertification must occur every 2 years. 

Certification Application Requirements: Covered employers must also submit a “wage records” list of all employees in the past calendar year, categorized by the county in which the employee works, gender and race/ethnicity with corresponding wages paid to each employee over that period, the employee’s start date with the business, and “any other information the Department [of Labor] deems necessary to determine if pay equity exists.” Employers with fewer than 100 employees must certify that they are exempt from requirements.

Compensation Approach: The original legislative text required employers to provide the IDOL with the “system” used to set compensation and required employers to select from certain options (e.g., market-based, performance pay, internal analysis, etc.).  Under the new amendments, the employer is required to describe the “approach” used to determine wages, but the employer is not required to select from any specific system. Instead, the statute states that “acceptable approaches include, but are not limited to, a wage and salary survey.”

Penalties: The March amendments provided that employers who fail to comply with the certification requirements or provide false information to the IDOL would result in a non-discretionary fine of 1% of their annual gross profits. Now, the Act authorizes a penalty of $10,000 for violation of the equal pay certificate requirements.

Grace Period: There is now a 30-day grace period for an employer to correct an inadvertent failure to timely file an application or cure deficiencies in the application for certification.

Third Party Access:  A current employee of a covered employer may request “anonymized” data regarding his/her specific job classification, including pay rate/salary. “Individually identifiable information” will not be subject to FOIA requests.  The June amendments set forth penalties for IDOL employees who are found to have leaked confidential application information – but the IDOL is authorized to share aggregate data and “individually identifiable information” with the IL Department of Human Rights or Office of the IL Attorney General.

Side note: On June 28, 2021, the U.S. Equal Employment Opportunity Commission (EEOC) announced that it is extending the July 19, 2021, deadline to submit and certify 2019 and 2020 EEO-1 Component 1 reports to Monday, August 23, 2021.

Our recommendations to employers remain the same as set forth in our March 23 blog article: 

  • 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.

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.