Illinois Passes Sweeping Legislation Impacting Employers

Illinois Passes Sweeping Legislation Impacting Employers

Executive Summary: On March 23, 2021, Governor J.B. Pritzker signed into law Illinois Senate Bill 1480 which amends the Illinois Human Rights Act, the Illinois Equal Pay Act of 2003, and the Illinois Business Corporation Act, and imposes new obligations on employers. The amendments are available at: https://www.ilga.gov/legislation/publicacts/101/101-0656.htm. The changes include:

• Consideration of Criminal Histories under Illinois Human Rights Act
• Amendments to Illinois Business Corporations Act regarding employee demographics
• New Equal Pay Requirements (including whistleblower protection for reporting violations of the new requiremens)

Illinois Human Rights Act Amendment − Consideration of Criminal Histories

Effective immediately: SB 1480 requires additional steps when reviewing an individual’s criminal record, amending the Illinois Human Rights Act to make it a violation of the Act to discriminate against an individual based on prior convictions unless:

1. there is a “substantial relationship” between the conviction(s) and the position sought; or
2. granting the employment or continuation of employment would involve an “unreasonable risk” to property or the safety or welfare of specific individuals or the general public.

“Substantial relationship” means consideration of whether the employment position offers the opportunity for the same or a similar offense to occur and whether the circumstances leading to the conviction will recur in the employment position. The employer must consider the length of time since the conviction, the number of convictions, and the nature and severity of the conviction(s) and relationship to the safety and security of others, as well as the facts surrounding the conviction, the age of the individual at the time of the conviction and evidence of rehabilitation efforts.

After taking these factors into consideration, if the employer determines that it will not offer employment to an applicant or that it will disqualify an employee for a new position based on his or her criminal record, the employer must first notify the individual of the preliminary decision in writing, and the notification must include:

1. notice of the disqualifying conviction(s) that are the basis for the preliminary decision and the employer’s reasoning;
2. a copy of the conviction report; and
3. an explanation of the individual’s right to respond to the notice before the employer’s decision becomes final.

The employee must be given at least 5 business days to respond to the notification.

If the employer makes a final decision to disqualify or take adverse action against the individual based on the conviction record, the employer must provide the applicant or employee with notice of the disqualifying conviction(s) that are the basis for the final decision, any information about the individual’s right to challenge this decision if such a process exists, and must also inform the individual about his/her right to file a charge with the Illinois Department of Human Rights. For more information, the IDHR has created a Frequently Asked Questions page on its website, available at: https://www2.illinois.gov/dhr/FilingaCharge/Documents/IL%20SB1480%20-%20Conviction%20Record%20Protections%20FAQ%20from%20IDHR.pdf.

Illinois Business Corporation Act Amendment – Reporting Employee Demographic Information

SB 1480 amends the Business Corporations Act of 1983 by requiring each domestic or registered foreign corporation that is required to file an EEO-1 report with the Equal Employment Opportunity Commission (EEOC) to provide substantially the same information to the Illinois Secretary of State in a format approved by the Secretary of State, which will publish the data on the gender, race, and ethnicity of each corporation’s employees on its official website. Employers will have to meet this new obligation by including the employee demographic information with the corporation’s annual report filed on and after January 1, 2023.

It is unclear at this time whether the EEO-1 type report to be filed with Illinois will need to include only Illinois employees, or all employees. A plain reading of the Act’s language (“[EEO information] of each of corporation’s employees”) supports the conclusion that the requirement is for all employees regardless of location. Further, other language in the Business Corporations Act specifically carves out other situations in which the corporation need only provide Illinois-based information, or information for wherever the corporation is located, which is not included in the EEO amendment. Ultimately, employers will need to wait to review the Secretary of State’s form to learn whether the amendment requires reporting as to all employees; however, employers should anticipate for now that the State will require information for employees in all locations.

Illinois Equal Pay Act of 2003 Amendment – Equal Pay Registration Certificate Required

SB 1480 requires private employers with more than 100 employees in the State of Illinois to obtain an “equal pay registration certificate” from the Illinois Department of Labor (IDOL) by March 24, 2024. New corporations must acquire certificates within three years after beginning operations. To obtain this certificate, an employer must pay a $150.00 filing fee and provide the gender, race, and ethnicity data of its employees to the Illinois Department of Labor as well as the total wages paid to each employee during the prior calendar year.

To obtain a certificate, the employer also must submit a statement signed by a corporate officer, legal counsel or authorized agent of the business, for each county where the business has a facility or employees, stating:

1. that the business is in compliance with Title VII of the Civil Rights Act of 1964, the Equal Pay Act of 163, the Illinois Human Rights Act, the Equal Wage Act, and the Equal Pay Act of 2003;
2. that the average compensation for 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 EEO-1 report for which the employee is expected to perform work (after taking into account factors such as experience, skill, effort);
3. that the business does not restrict employees of one sex to certain job classifications and makes employment decisions without regard to sex;
4. that wage and benefit disparities are corrected when discovered; and
5. how often wage and benefits are evaluated to ensure compliance with the Act.

The equal pay compliance statement shall also indicate whether the business, in setting compensation and benefits, utilizes a market pricing approach, state prevailing wage requirements or union contract requirements, a performance pay system, internal audit analysis, or an alternative approach.

An employer who does not obtain a certificate or whose certificate is suspended or revoked after an IDOL investigation is subject to a mandatory civil penalty equal to 1% of “gross profits.” Recertification is required every two years.

This section of the law also includes whistleblower protection, stating that a business shall not take any retaliatory action (reprimand, discharge, suspension, demotion, denial of promotion or transfer, or change in terms and conditions of employment) against an employee who discloses or threatens to disclose to a supervisor or to a public body any activity, inaction, policy, or practice implemented by a business that the employee reasonably believes is a violation of a law, rule or regulation, or 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 assists or participates in a proceeding to enforce this Act.

Best Practices for Illinois Employers:

Employers should take immediate action in handling consideration of applicant or employee criminal background checks to ensure compliance with the modifications to the Illinois Human Rights Act. Decisions on employee convictions must not only be internally justified, but externally documented with significant notice obligations owed to prospective applicants and employees. Employers must also begin training all employees who conduct interviews or make hiring decisions on proper procedures for inquiry into criminal backgrounds, perhaps even creating a checklist of questions to ask.

Employers should also immediately begin auditing their pay practices to ensure they will be able to obtain the required equal pay certificate beginning in 2024. Employers will be required to report their pay practices to the State in great detail, and therefore, now is the time to begin analysis to determine whether changes need to be made over the coming years. Monetary penalties may be significant depending on the business’s gross profits, and audit by the Illinois Department of Labor may prove inconvenient and challenging.

In addition, private employers with more than 100 employees should ensure that their demographic reporting under federal EEO-1 requirements is up to date to plan for the new reporting to be required by the State of Illinois beginning in 2023. This is the time for employers to take a close look at their demographics, keeping in mind that this information will soon become publicly available.

If you have any questions regarding this Alert, please contact the authors, Karen Milner, partner in our St. Louis office at kmilner@fordharrison.com, or Kimberly Ross, partner in our Chicago office, at kross@fordharrison.com. Of course, you can also contact the FordHarrison attorney with whom you usually work.