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.
In the past six months, Illinois enacted SB 1480 and SB 1847, which amended various laws including the Illinois Equal Pay Act (the “Act”). Governor Pritzker signed SB 1480 into law on March 23, 2021 (“March 2021 Amendments”). As previously discussed, SB 1480 will require employers that currently file EEO-1 reports to submit similar reports to the state of Illinois, and includes new pay data reporting and certification requirements, among other obligations. On June 25, 2021, Governor Pritzker signed SB 1847 into law, which further amended the Act (“Recent Amendments”). The most significant changes between the March and Recent Amendments include:
- a shortened timeline to obtain the required equal pay certification;
- expanded reporting requirements related to employee demographics;
- additional wage comparison factors;
- revised compensation-setting factors;
- revised pay data protection provisions;
- amended penalty provisions; and
- a new appeals procedure.
As a result, Illinois employers will need to begin auditing and potentially modifying their compensation practices immediately to obtain an equal pay registration certificate, which must now be submitted to the Illinois Department of Labor (the “Department”) between March 24, 2022 and March 24, 2024.
Equal Pay Certificate Timeline
The timeline for complying with the equal pay certification requirement has been shortened as the deadline has been moved up. The March 2021 Amendments provided employers with a three-year “ramp up” period to comply with the new law, requiring employers to obtain an equal pay registration certificate no later than March 24, 2024. The Recent Amendments now require employers to “submit an application to obtain an equal pay registration certificate, between March 24, 2022 and March 23, 2024.” Further, the Recent Amendments state that “[t]he Department shall assign each business a date by which it must submit an application to obtain an equal pay registration certificate.” The Recent Amendments make clear, however, that employers will not be able to rely upon the Department’s failure to assign a submission deadline, but the Department’s failure to notify any business of its certification or recertification deadline “may be a mitigating factor when making a determination of a violation” of the Act. This means employers will need to kick it into high gear and initiate equal pay audits now as some employers may be required to submit certification within the next seven months.
Employee Demographic Information
The Recent Amendments also expand the scope of employee demographic information that employers must disclose in their equal pay certificate applications. In addition to the requirements that employers must compile a list of employees broken down by race, ethnicity, and gender and report the total wages paid to each employee during the previous calendar year, employers must now additionally include “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.” This change requires more detailed information from the employer and gives the Department vast discretion to seek additional information from an employer so long as it deems such information “necessary to determine if pay equity exists among employees.”
Wage Comparison Factors
The Recent Amendments lengthened the list of wage comparison factors an employer must consider when completing an equal pay certificate application. Under the March 2021 Amendments, businesses were required to certify “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 . . . 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 Recent Amendments additionally include “education or training, job location, [and] use of a collective bargaining agreement.” This change benefits employers because it offers them slightly more flexibility to explain differences in employee pay.
Approach to Setting Compensation
The Recent Amendments simplified the requirements related to an employer’s approach to setting compensation. Under the March 2021 Amendments, employers were required to indicate whether in setting compensation and benefits, they utilize: (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 with a description. The Recent amendments are more flexible, removing that language and instead requiring that employers simply disclose “the approach the business takes in determining what level of wages and benefits to pay its employees,” which includes, but is not limited to “a wage and salary survey.” This amendment gives employers greater leeway to choose the method by which they determine salaries and to explain any potential differences in pay.
Data Protection Provisions
The Recent Amendments provide more detailed data protection provisions. Under the March 2021 Amendments, data provided by an employer in its equal pay registration application was exempt from requests under the Illinois Freedom of Information Act (FOIA). The Recent Amendments 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 [FOIA].” The Recent Amendments make clear that individual and aggregated data associated with any business or individual is confidential and exempt from an Illinois FOIA request. It is important to note, however, that the Recent amendments have no impact on the March 2021 Amendment to the Business Corporation Act, which states 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. Thus, the Recent Amendments potentially broaden the visibility of pay data by only protecting information that is tied to specific individuals or the business. This means, for example, that news media outlets may obtain broad sets of employer pay data, so long as it is not tied to a particular business or individual.
The Recent Amendments made two significant changes to the penalty provisions from the March 2021 Amendments. First, they deleted the provision that subjected employers to a penalty of 1% of a business’s gross profits for falsifying or misrepresenting information on an application, failing to obtain an equal pay registration certificate, or after suspension or revocation of certification by the Department. The Recent Amendments limit penalties such that any employer not in compliance with the Equal Pay Act certification requirements “shall be fined up to $10,000.” It is not clear whether this language anticipates a one-time penalty for any violation or if an employer may be fined up to $10,000 per violation.
Second, the Recent Amendments increased the civil fines an employer may be subject to for violating the Act. Prior to the Recent Amendments, any employer with four or more employees and that violated the Act would be subject to fines of up to $2,500 for the first offense, $3,000 for the second offense, and $5,000 for the third offense. Now, that provision applies only to employers with between “4 and 99 employees” and any “employer with 100 or more employees” that fails to comply with the equal pay certification requirements, “shall be fined up to $10,000 per employee affected.” This penalty could aggregate quickly if numerous employees are affected. For example, if 20 employees are affected, the penalty could be up to $200,000. This provides another reason that employers should promptly initiate equal pay audits now to determine if any discrepancies exist and how best to resolve them.
Procedure to Appeal
As a result of the Recent Amendments, employers now have a statutory period of time to cure deficiencies in their equal pay certification application, and to seek administrative review of the Department’s decision to impose any civil penalties. Specifically, an employer may “cure any deficiencies in its application that led to the rejection and resubmit the revised application to the Department within 30 calendar days of receiving a rejection. Applicants shall have the ability to appeal rejected applications.” Further, before civil penalties can be imposed, employers “may obtain an administrative hearing in accordance with the Illinois Administrative Procedure Act.” The Recent Amendments thus provide a layer of protection to employers that did not exist in the March 2021 Amendments. While employers are not guaranteed to be successful at an administrative hearing, they at least now have another opportunity to come into compliance with the Act, or to demonstrate why penalties are not appropriate.
Recommendations for Employers
Employers should immediately take steps to bring themselves into compliance with the new equal pay certification requirements by conducting pay audits. Employers will need to be cognizant of 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 must be prepared to apply for an equal pay certificate as early as March 24, 2022. The Recent Amendments make clear that any employer that is required to obtain an equal pay certificate, but does not comply with the certification requirements, will be penalized.
While the Recent Amendments provide more clarity than the March 2021 Amendments, we anticipate that the Department will publish guidance in the coming months to clarify these requirements. Littler will monitor these new employer reporting requirements under Illinois law, and will provide additional updates when the state issues new guidance.