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Illinois Employers Face Significant New Requirements, Penalties Under Equal Pay Act, Business Corporation Act Amendments

In Short

The Situation: Recent amendments to the Illinois Equal Pay Act of 2003 and Illinois Business Corporation Act of 1983 create significant new reporting and certification requirements for Illinois employers, along with new whistleblower protections and severe penalties for non-compliance.

The Result: Beginning on January 1, 2023, qualifying employers must submit EEO-1-like data to the Illinois Secretary of State for publication on its official website. By March 23, 2024 (with some exceptions), qualifying employers must obtain an equal pay registration certificate by certifying compliance with various employment laws and pay equity requirements. 

Looking Forward: Employers should begin preparing for the new law's implementation now, such as by reviewing and remedying pay equity disparities, revisiting the company's processes for evaluating pay equity, updating the company's policies, practices, and training to account for new whistleblower protections, and addressing any unexplainable demographic disparities reflected in the company's EEO-1 data. 

Amendments to the Illinois Equal Pay Act of 2003 

 Public Law 101-0656, effective March 23, 2021, adds a new Section 11 to the Illinois Equal Pay Act of 2003 (EPA) that requires private employers with more than 100 employees to obtain an equal pay registration certificate from the Illinois Department of Labor ("IDOL"). The certificate must be obtained before March 23, 2024, or within three years of being eligible to transact business in Illinois, whichever is later. To obtain the certificate, employers must pay a $150 filing fee and submit a statement signed by an officer, legal counsel, or agent of the business that:

  • Certifies that the business is in compliance with Title VII of the Civil Rights Act, the Equal Pay Act of 1963, the Illinois Human Rights Act, the Equal Wage Act, and the Equal Pay Act of 2003; 
  • Certifies that the average compensation for female and minority employees is not consistently below the average compensation for male and non-minority employees when adjusted for lawful differentiating factors such as length of service, job requirements, experience, skill, and effort; 
  • Certifies that the business does not restrict certain genders to specific roles and makes employment decisions without regard to sex; 
  • Explains how often the business reviews wages and benefits for disparities among protected and non-protected classes and certifies that wage and benefit disparities are corrected when identified; and
  • Identifies the approach the business uses to determine employee compensation (e.g., market pricing, prevailing wage or union contract, performance-based pay, alternative, etc.).

The certification must be renewed every two years. If the business is already required to file an EEO-1 with the EEOC, it must also submit a copy of the EEO-1 to IDOL along with a list of all employees employed during the last calendar year, stratified by the EEO-1's race, gender, and ethnicity categories, along with corresponding wage information. 

The new law authorizes IDOL to audit businesses and revoke the registration certificate if it finds the business has not made good faith attempts to comply with, or has multiple violations of, Title VII, the Equal Pay Act of 1963, the Illinois Human Rights Act, the Equal Wage Act, or the Equal Pay Act of 2003, or fails to comply with new Section 11. It calls for a civil penalty equal to 1% of a business's gross profits for a business's failure to obtain an equal pay registration certificate or if the certificate is suspended or revoked after an IDOL investigation. 

The amendments contain broad new whistleblower protections, too. Specifically, employers are prohibited from retaliating against any employee who: (i) discloses or threatens to disclose to a supervisor or public body any employer activity, inaction, policy, or practice that the employee reasonably believes is in violation of a law, rule, or regulation; (ii) provides information to or testifies before any public body conducting an investigation, hearing, or inquiry into any violation of a law, rule, or regulation by a nursing home administrator; or (iii) assists or participates in a proceeding to enforce the Equal Pay Act. Remedies for violations of the whistleblower provisions include reinstatement (of employment and fringe benefits), double back pay, interest on back pay, and costs and attorney's fees, among other relief.

Amendments to the Illinois Business Corporation Act of 1983 

The new law also amends the Business Corporation Act of 1983 to require every company that files an EEO-1 with the EEOC to submit, in connection with its annual report, "information that is substantially similar to the employment data reported under Section D of the corporation's EEO-1 in a format approved by the Secretary of State." This requirement is effective January 1, 2023. Within 90 days of receipt of the company's annual report, the Secretary will publish the company's EEO-1-like data on its website.

Analysis

Given the significant civil penalty for failure to obtain a registration certificate (or if the certificate is suspended or revoked after an IDOL investigation)—i.e., 1% of gross profits—Illinois employers should consider assessing and remedying any pay equity disparities well before 2024. The new law requires employers to submit individual employee pay data to IDOL and gives IDOL authority to audit employers, so employers should anticipate additional government scrutiny of pay equity. Moreover, businesses will be required to certify how often they review employee wages and benefits for disparities among protected and non-protected classes, so employers should institute or revisit processes for evaluating and remedying pay equity disparities on a routine basis as well.

The amendments to the Equal Pay Act leave several open questions. For example, it is unclear how the law defines "compliance" with Title VII, the Equal Pay Act of 1963, the Illinois Human Rights Act, the Equal Wage Act, and the Equal Pay Act of 2003 for purposes of the certification requirement. Similarly, while the new law authorizes IDOL to revoke a registration certificate if a business has multiple violations of those laws, the law does not define "violation." Notably, under Illinois' Workplace Transparency Act, Illinois employers already must disclose to the Illinois Department of Human Rights each July 1 any final and non-appealable judgment that finds sexual harassment or unlawful discrimination against the employer under federal and state anti-discrimination laws. It is unclear whether a "violation" under the recent amendments will be defined as a final and non-appealable judgment or in some other manner.

Illinois employers also must be mindful of the law's broad new whistleblower protections. Indeed, the protections cover employees who disclose or threaten to disclose what they reasonably believe are violations of a law, rule, or regulation both internally (to a supervisor) or externally (to a public body). Employers should review their retaliation policies and training to ensure supervisors are aware of the scope of these new employee protections.

Additionally, employers will need to wait for further guidance from the Secretary of State about the reporting required in connection with a company's annual report, including whether the report must include only employees in Illinois or a broader population. Further, employers should be aware that plaintiffs' lawyers, along with the press and public watchdog groups, will have access to the EEO-1-like data that the Secretary intends to publish on its website. Thus, employers with significant demographic disparities in their EEO-1 data may become targets for legal claims (e.g., discrimination or pay equity claims) and/or public scrutiny and should begin taking steps to remedy any unexplainable disparities sooner rather than later. 

Three Key Takeaways

  1. Given the new certification and reporting requirements under the Equal Pay Act, Illinois employers should begin evaluating and remedying pay equity disparities and establish processes for updating those analyses to avoid potentially significant civil penalties.
  2. Employers should review their policies and training to ensure they accurately reflect the broad scope of new whistleblower protections, which cover employees who report or threaten to report what they believe are legal violations either internally or externally.
  3. Given the required disclosure of EEO-1-like data to the Secretary of State and subsequent publication on its website, employers with significant demographic disparities should take steps to remedy any unexplainable disparities to avoid potential legal and public relations consequences.

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