A mere three months after Illinois enacted sweeping amendments to the Illinois Equal Pay Act of 2003, rendering it one of the most far-reaching state equal pay laws in the country, Illinois Governor J. B. Pritzker signed Senate Bill 1847 into law on June 25, 2021 making further extensive amendments to the law. These new amendments are effective upon enactment. They expand certain reporting requirements while potentially accelerating “equal pay registration certification” deadlines by up to two years – to a date between March 24, 2022 and March 23, 2024 to be assigned for each covered employer by the Illinois Department of Labor (IDOL). Helpfully for Illinois employers, the amendments also clarify several ambiguities in the March 2021 enactment and delete a controversial penalty for certification-related noncompliance of 1% of a company’s gross profits.
Ancient History – Legislature Amends the Illinois Equal Pay Act in March 2021
Three months ago, Illinois amended the Illinois Equal Pay Act of 2003, 820 ILCS § 112/1 et seq. (as well as certain other laws). SB 1480, enacted on March 23, 2021, required private employers with more than 100 employees in Illinois to obtain an “equal pay registration certificate” from the IDOL by filing an application with various extensive disclosures and certifications, and recertify every two years thereafter.
Obtaining a certificate required a small fee and submission of a compliance statement certifying, among other things, that the business is in compliance with various federal and state civil rights and equal pay laws, does not restrict job opportunities to one sex and makes promotion and retention decisions without regard to sex, provides average compensation to its female and minority employees at a rate “not consistently below” average compensation for male and non-minority employees within each of the relevant EEO-1 Report major job categories, and corrects wage and benefit disparities when identified to ensure legal compliance.
These certification requirements were coupled with several additional demographic and pay data disclosure requirements. For example, SB 1480 separately amended the Illinois Business Corporation Act – which remains unaffected by SB 1847 – to require covered domestic and foreign corporations that are EEO-1 Report filers to submit with their annual corporate report to the Illinois Secretary of State “substantially similar” workplace demographic information, which “data on the gender, race, and ethnicity of each corporation’s employees” the secretary then “shall publish” on its official website within 90 days thereafter. While the workplace demographic data filed with the Illinois Secretary of State is public, the remaining certification-related data submitted to the IDOL was considered private under the March 2021 amendment and not subject to public disclosure including under the Illinois Freedom of Information Act (IL FOIA).
To enforce the amendments, the IDOL was empowered to deny, suspend, or revoke an employer’s certificate under various circumstances as long as it sought to conciliate with the business regarding wages and benefits due to employees. If the company’s certification was revoked or suspended, or if it simply failed to obtain an equal pay registration certificate, the IDOL was required by law to issue a civil penalty equal to 1% of the business’s “gross profits,” which was not defined.
Amended Again: SB 1847 Further Amends the Illinois Equal Pay Act
On June 25, 2021, the state further amended the Illinois Equal Pay Act with substantive changes, including an expansion of certain reporting requirements and removal of the controversial penalty of 1% of gross profits. Note that while the equal pay registration requirements generally continue to apply to “any private employer who has more than 100 employees in the State of Illinois” and is required to file a federal EEO-1 Report with the EEOC, Governor Pritzker’s press release for the new amendments describes all such requirements as applying to “businesses with 100 or more employees.” A summary of various aspects of the most recent amendments, and certain changes relative to the March 2021 enactment, are as follows:
- Equal Pay Certificate compliance timeline: Under SB 1480, initial certification was required “within 3 years after the effective date of this amendatory Act” for existing covered employers – i.e., by March 23, 2024 – or, for employers commencing business operations in Illinois after March 23, 2021, within three years thereafter, with recertification required every two years. The new amendatory law requires the IDOL to “collect contact information” from existing and new covered businesses (businesses that become newly covered must submit their contact information to the IDOL by January 1 of the following year), after which the IDOL will assign each business a deadline by which it must apply for the equal pay registration certificate. For existing covered businesses, that deadline may be as early as March 24, 2022 or as late as March 23, 2024, potentially moving the initial certification deadline two years sooner than anticipated and fewer than nine months from the passage of the amended law. Covered businesses that commence(d) operations in Illinois after March 23, 2021 will be assigned a deadline of no earlier than January 1, 2024. Notably, even if the IDOL does not assign an application deadline to a business, it must still comply by the applicable (and presumably longest potential) deadline. Covered employers still must recertify every two years after their initial certification, with recertification deadlines again “determined” by the IDOL. The IDOL’s failure to notify an employer of its recertification deadline again does not excuse noncompliance, but “may be a mitigating factor when making a determination of a violation . . . .”
- EEO-1 Report submission still required, but scope potentially ambiguous: The original amendments required a covered business to submit EEO-1 Report(s) for “each county in which the business has a facility or employees.” While not entirely clear, the implication was that EEO-1 Reports likely were to be filed for Illinois facilities and employees. Curiously, the new amendments delete the above-quoted “county” qualifier, thus now requiring businesses to “submit to the Director a copy of the business’s most recently filed Employer Information Report EEO-1.” It is unclear, for example, whether this means a covered business may have to submit a consolidated report that could encompass employees outside of Illinois. As noted below, the new amendments added a separate requirement to disclose by county the location for the business’ employees, so it is possible that the above revisions were not intended to be substantive, but this again remains unclear.
- Expanded employee demographic information: The March 2021 amendments required employers with more than 100 employees in Illinois to compile a list of all employees, organized by gender, race, and ethnicity, and report the total wages paid to each employee during the last calendar year (to the nearest $100). In addition to this information, the new amendments now require employers to specify “the county in which the employee works, the date the employee started working for the business, [and] any other information the Department deems necessary to determine if pay equity exists among employees. . . .” While this last clause is broad, it appears to largely overlap with certain audit and investigative rights the IDOL had under prior law. At the same time, the addition of this language and its breadth reaffirm the state’s and the IDOL’s likely increased focus on affirmatively investigating equal pay compliance.
- Broader certification of compliance: The March 2021 amendments required covered employers to certify compliance specifically with “Title VII of the Civil Rights Act of 1964, the Equal Pay Act of 1963, the Illinois Equal Pay Act, the Illinois Human Rights Act, and the Equal Wage Act.” Under the new amendments, covered employers now must certify compliance with “this [Illinois Equal Pay] Act and other relevant laws, including but not limited to” the foregoing named laws. It is not clear what these “other relevant laws” are, including whether they may encompass (or be argued by the IDOL to encompass) other federal laws beyond Title VII and the federal Equal Pay Act and/or state and local laws outside Illinois. These issues are of concern because failure to make a good faith effort to comply with, or engaging in multiple violations of, “the Acts identified in” the compliance certification are among the grounds for suspension or revocation of an equal pay registration certification and related penalties. It remains to be seen whether the IDOL will take the position that these “identified” Acts are limited to those specifically named, or extend to unspecified “other relevant laws” as well.
- New factors for wage comparison: The March 2021 amendments required a business to certify “that the average compensation for its female and minority employees is not consistently below the average compensation,” as determined by the US Department of Labor, for its male and nonminority employees within each of the major job categories in the EEO-1 Report, “taking into account factors such as length of service, requirements of specific jobs, experience, skill, effort, responsibility, working conditions of the job, or other mitigating factors.” The new amendment retains all these factors, and adds “education or training, job location, [and] use of a collective bargaining agreement” to the non-exhaustive list.
- Replaces “compensation approach” certification: The March 2021 amendments required employers to “indicate whether the business, in setting compensation and benefits, utilizes: (A) a market pricing approach; (B) State prevailing wage or union contract requirements; (C) a performance pay system; (D) an internal analysis; or (E) an alternative approach to determine what level of wages and benefits to pay its employees” with a description thereof. The new amendment deletes this language and instead requires disclosure of “the approach the business takes in determining what level of wages and benefits to pay its employees; acceptable approaches include, but are not limited to, a wage and salary survey.” This new language is more general and provides employers with somewhat greater reporting flexibility, but arguably is not substantively different from the prior language.
- More nuanced data protection provisions: Where the earlier amendments provided that equal pay registration certification “data” submitted to the IDOL would be exempt from IL FOIA, the new amendments now provide that “any individually identifiable information submitted to the Director within or related to an equal pay registration application or otherwise provided by an employer in its equal pay compliance statement . . . shall be considered confidential information and not subject to disclosure pursuant to the Illinois Freedom of Information Act.” Per the new amendments:
“[I]ndividually identifiable information” means data submitted pursuant to this Section that is associated with a specific person or business. Aggregate data or reports that are reasonably calculated to prevent the association of any data with any individual business or person are not confidential information. Aggregate data shall include the job category and the average hourly wage by county for each gender, race, and ethnicity category on the registration certificate applications. The Department of Labor may compile aggregate data from registration certificate applications.
This appears to mean individual and aggregated data is confidential and IL FOIA-exempt if it can be associated with any business or individual. But the new amendment does not change recent Business Corporation Act amendments, which require the Secretary of State to publicly post certain EEO-1 Report demographic information submitted to the state. Notably, reflecting the state’s enforcement priorities, the new amendments also provide “the Department may share data and identifiable information with the Department of Human Rights, pursuant to its enforcement of Article 2 of the Illinois Human Rights Act, or the Office of the Attorney General, pursuant to its enforcement of Section 10-104 of the Illinois Human Rights Act.”
- Provides for employee requests for job classification and pay information: The new amendments now provide that “a current employee of a covered business may request anonymized data regarding their job classification or title and the pay for that classification,” but note that “no individually identifiable information may be provided to an employee making a request under this paragraph.” The language and context of this provision suggest employees may make such requests of the IDOL, and not employers themselves, though this is not entirely clear. It also raises questions as to what “anonymized data” employees can obtain, e.g., pay range data or specific employee-by-employee data with identities redacted? These are among the issues that may be clarified in forthcoming IDOL guidance.
- New procedural protections: The new amendments now provide that (1) “[Businesses applying for certification] shall have the opportunity to cure any deficiencies in its application that led to the rejection, and re-submit the revised application to the Department within 30 calendar days of receiving a rejection. Applicants shall have the ability to appeal rejected applications”; and (2) the Illinois Administrative Procedures Act review now extends to “the imposition of civil penalties.”
- Deletion of penalty of 1% of gross profits: This controversial requirement, enacted in March 2021 for violations of the Act’s certification- and disclosure-related provisions, is now replaced with a penalty of “up to $10,000” for “a violation” of Section 11 of the Illinois Equal Pay Act, which includes the certification and compliance requirements. It is not clear if a business can be subject to separate fines for multiple, separate Section 11 violations. In any event, the revised penalty is somewhat more clear and potentially less draconian than the prior provision, even if still severe. Employers who inadvertently fail to file an application or recertification “shall be provided 30 calendar days by the Department to submit the application or recertification” before the imposition of any penalty under this subsection.
- Increased civil fines for other violations: The amended act also increases per-employee civil fines on larger employers for Illinois Equal Pay Act violations not involving Section 11 (e.g., for violating an employee’s right to receive equal pay for equal work irrespective of sex). The prior law provided that employers with “4 or more” employees were subject to civil fines “for each employee affected” of up to $2,500 for the first violation and up to $5,000 for the third and subsequent violations. Under the new amendments, “An employer with 100 or more employees who violates any Section of this Act except for Section 11 shall be fined up to $10,000 per employee affected.”
- Potential expanded private right of action under Section 11: Section 30 of the Illinois Equal Pay Act, which provided certain private rights of action for violations of Section 10 of the Act, now includes a reference to Section 11. However, this potentially expanded private right of action only applies if “an employee is paid by his or her employer less than the wage to which he or she is entitled in violation of Section 10 or 11 of this Act . . . .” Again, the scope of this private right of action under Section 11 is unclear, including whether it may extend (or be argued to extend) beyond equal pay violations under the Illinois Equal Pay Act itself and also encompass “wage”-related violations of any “other relevant laws” for which an employer must certify compliance under Section 11. However, the foregoing language does not appear to create a general private right to enforce the Section 11 certification and disclosure requirements, which aligns with the language of Section 11 as focusing on employer obligations to the IDOL.
- Deleted whistleblower protections: Express “whistleblower protection” provisions added by the amendments in March 2021 have been deleted by the new amendments. However, this deletion appears to be more form over substance, as these whistleblower protections already were largely covered by other legal provisions, including pre-existing Section 25 of the Illinois Equal Pay Act and the Illinois Whistleblower Act, 740 ILCS 174/1, et seq.
- Housekeeping: The act also removed several scrivener’s errors added by the previous bill.
What Should Illinois Employers Do Now?
- Assess whether they will be able to apply for the required equal pay registration certificate, if required to do so by the IDOL, by the earliest potential date of March 24, 2022
- Continue taking steps warranted by the March 2021 amendments, including to assess pay equity issues as required by the law
- Consider the practical effects of having their EEO-1 employee composition data being publicly available beginning with annual reports filed in January 2023
Contacts
If you have questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
Chicago
Jonathan D. Lotsoff
Stephanie L. Sweitzer
Ami N. Wynne