Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.
Illinois recently enacted SB 1480, which amends several laws including the Illinois Business Corporation Act and the Illinois Equal Pay Act. While employers have significant lead time to begin their compliance efforts, SB 1480 will render employers’ diversity efforts more transparent by making public their EEO-1 reports, which will be published on a state website beginning in early 2023. Illinois employers will also need to begin reviewing and potentially modifying their compensation practices immediately to obtain an equal pay registration certificate, which will be required as of March 24, 2024.
Reporting and Disclosure of an Employer’s EEO Breakdown
As most employers are aware, all private employers with 100 or more employees, and those with 50 or more employees and a government contract or subcontract that equals or exceeds $50,000, are required to file annually an EEO-1 report, which includes a demographic breakdown of the employer’s workforce by race and gender (Section D of the EEO-1 report).
Based on SB 1480, Illinois employers currently required to file an EEO-1 report will now be required to submit a similar report to the state of Illinois that includes “information that is substantially similar to the employment data reported under Section D of the federal EEO-1 Report.” According to the new law, the specific details will be provided based on “a format approved by the Secretary of State.”
The Illinois EEO-1 report will be significantly different from the federal EEO-1 report in one major way—the Illinois EEO-1 report will be made public. The federal EEO-1 reports are filed confidentially with the “Joint Reporting Committee.” The U.S. Equal Employment Opportunity Commission (EEOC), but not the public, can access these reports. In contrast, information submitted to the state of Illinois will be made broadly available. SB 1480 expressly provides that “the Secretary of State shall publish the data on the gender, race, and ethnicity of each corporation’s employees on the Secretary of State’s official website” within 90 days of receipt.
Based on the express terms of the statute, these new reporting requirements will begin on or after January 1, 2023.
New Pay Data Reporting Requirement
Illinois joins California as the only other state that will require employers to collect and submit employee pay data to the state. The California reporting requirements become effective this week, compared to Illinois’ far longer “runway” for employers to comply with its new law (i.e., pay data reporting begins January 1, 2023 and employers must obtain an equal pay registration certificate by March 24, 2024).
California SB 973, which was signed into law by Governor Newsom, requires private employers with 100 or more employees and that are required to file an annual EEO-1 report to submit a “pay data report” to the California Department of Fair Employment and Housing no later than March 31, 2021, and annually thereafter. Pay data reports in the Golden State must include a breakdown of employees by race, ethnicity, and sex in 10 broadly defined job categories. These reports are further broken down by employee compensation data categorized using the U.S. Bureau of Labor Statistics’ 11 pay bands, ranging from “less than $19,239” to “more than $208,000,” and again by race, ethnicity, and sex. Employers are also required to report total hours worked by each employee in a given pay band during the calendar year.1
The California statute mirrors the short-lived federal EEO-1 “Component 2” filing adopted during the Obama administration, which required pay data reporting in addition to the traditional “Component 1” employee reporting breakdown by sex, race, ethnicity, and job categories. Under the Obama-era reporting procedure, employers were required to submit Component 2 pay data reports to the EEOC. The EEO-1 Component 2 filing was discontinued under the Trump administration due to criticism involving collection costs, privacy issues, and the data’s lack of utility. It is yet to be determined whether the Biden administration will bring back similar federal reporting requirements.
Based on the newly enacted Illinois bill, any private employer with 100 or more employees in the state will be required to obtain an “equal pay registration certificate” from the Illinois Department of Labor (“or certify in writing that it is exempt”). Each employer covered under this new law will be required to submit a copy of its “most recently filed” EEO-1 “for each county in which the business has a facility or employees,” except that a “business that has employees in multiple locations shall submit a single application…regarding all of its operations in Illinois.” More drastic is the requirement under this new Illinois law to compile “a list of all employees during the past calendar year, separated by gender and the race and ethnicity categories,” as included in the EEO-1 report, and “report the total wages as defined by Section 2 of the Illinois Wage Payment and Collection Act paid to each employee during the past calendar year, rounded to the nearest hundred dollar…”2 Each covered employer requesting an equal pay certification certificate must submit a detailed report.
The following are the key factors to be considered in preparing for compliance with Illinois’ new “equal pay” initiative:
Timeline: Employers have a three-year “ramp up” period to comply with the new law. Employers will be required to obtain an equal pay registration certificate no later than March 24, 2024. If an employer commences business in the state after the Act takes effect, the business must obtain a certificate within three years of commencing business in Illinois. Employers must recertify every two years thereafter.
Application: To apply for an equal pay registration certificate, businesses will be required to submit the following to the Illinois Department of Labor:
- Compliance statement: An equal pay act compliance statement, signed by a corporate officer, legal counsel, or authorized agent of the business;
- Employer Information Report EEO-1: If required to file an EEO-1 report with the EEOC, a copy of the business’s most recently filed EEO-1 report for each county in which the business has a facility or employees;
- List of employees: Separated by gender and race/ethnicity categories as reported in the business’s most recently filed EEO-1 report and the total wages as defined by Section 2 of the Illinois Wage Payment and Collection Act paid to each employee during the past calendar year; and
- $150 filing fee.
Compliance Statement: An appropriate compliance statement, signed by a corporate officer, legal counsel, or authorized agent of the business, must certify the following:
- The business complies with 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;
- The average compensation for its female and minority employees is not consistently below the average compensation for its male and non-minority employees, as determined by the U.S. Department of Labor’s rule, 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 business does not restrict employees of one sex to certain job classifications and makes retention and promotion decisions without regard to sex;
- The business corrects wage and benefit disparities when identified to ensure compliance with the above-cited Acts;
- How often wages and benefits are evaluated to ensure compliance with the above-cited Acts; and
- Whether the business utilizes a market pricing approach, state prevailing wage or union contract requirements, performance pay system, internal analysis, or an alternative approach in setting compensation.
Multiple Locations: A business that operates in multiple locations or has multiple facilities within the state should submit a single application regarding all its operations in Illinois.
Rejection or Revocation of Certificate: Within 45 calendar days of receipt of application, the Illinois Department of Labor will issue an equal pay registration certificate. An application will be rejected only if it does not comply with the above-enumerated requirements. An equal pay registration certificate may be suspended or revoked if the business fails to make a good-faith effort to comply with the above-referenced Acts, fails to make a good-faith effort to comply with the above-enumerated requirements, or has multiple violations of the above Acts or requirements. Prior to suspension or revocation of an employer’s certificate, the Illinois Department of Labor must first seek conciliation with the employer regarding the wages and benefits due to the employees.
Audit: The Illinois Department of Labor may audit a business’s compliance by requesting the following information regarding employees who are expected to perform work under the contract in each of the major job categories in the EEO-1 report:
- Number of male and female employees;
- Average annualized salaries paid to male and female employees;
- Information on performance payments, benefits, or other elements of compensation;
- Average length of service for male and female employees in each major job category; and
- Other information identified by the business or by the Illinois Department of Labor as needed to determine compliance with above-specified requirements.
Penalty: Any business that falsifies or misrepresents information on its application, does not obtain an equal pay registration certificate, or whose certificate is suspended or revoked after Department investigation may be penalized in an amount equal to 1% of the business’s gross profits.
Whistleblower Protection: SB 1480 defines retaliatory action as the discharge, reprimand, demotion, suspension, denial of promotion or transfer, or any other change in the terms and conditions of employment that is taken against an employee in retaliation for the employee’s engaging in protected activity. A business may not take retaliatory action against an employee for any of the following:
- Disclosing or threatening to disclose activity, inaction, policy or practice implemented by the business that the employee reasonably believes is in violation of a law, rule, or regulation;
- Providing information or testifying before a public body conducting an investigation, hearing, or inquiry into any violation of a law, rule, or regulation by a nursing home administrator; or
- Assisting or participating in a proceeding to enforce the provisions of this Act.
An employer will not violate this section if it shows, through clear and convincing evidence, that it would have taken the same action in the absence of the employee’s protected activity.
Employee Remedies: If an employer violates the whistleblower provision, an employee may be awarded all remedies necessary to make the employee whole and to prevent the employer from committing any future violations. Remedies include, but are not limited to:
- Reinstatement to the same position or an equivalent one;
- Two times the amount of back pay;
- Interest on the back pay;
- Reinstatement of seniority and full fringe benefits; and
- Reasonable attorney’s fees and costs.
Recommendations for Employers
Because SB 1480 has been signed into law, employers need to begin taking steps to bring themselves into compliance, based on two key dates: (1) employers will need to be prepared for their EEO-1 reporting obligations in the state of Illinois as of January 1, 2023; and (2) employers should consider conducting privileged EEO audits, with the assistance of legal counsel, to identify any changes that may be required for obtaining an equal pay certificate, which will be required as of March 24, 2024.
Littler will closely monitor these new employer reporting requirements under Illinois law, and will provide additional updates as the state issues new guidance.
1 See Jim Paretti, Denise Visconti, and Allan King, California Poised to Enact Law Requiring Compensation Data Collection, Littler ASAP (August 31, 2020); Jim Paretti, Denise Visconti, Allan King, David Goldstein, and Chris Gokturk, California Offers Limited Guidance on New Pay Data Reporting Requirements; Further Guidance Expected, Littler ASAP (November 3, 2020); Jim Paretti, Denise Visconti, Allan King, David Goldstein, and Chris Gokturk, California Provides Additional Guidance on Employee Pay Data Reporting, Litter ASAP (November 25, 2020; Britney Torres and Jim Paretti, California DFEH on Track to Collect Pay Data Reports by March 31, 2021, Littler ASAP (February 3, 2021).
2 Section 2 of the Wage Payment and Collection Act states in relevant part, “For all employees, other than separated employees, ‘wages’ shall be defined as any compensation owed an employee by an employer pursuant to an employment contract or agreement between the 2 parties, whether the amount is determined on a time, task, piece, or any other basis of calculation.” 820 ILCS 115/2.