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Illinois Employers Face Significant New Requirements, Penalties Under Equal Pay Act, Business Corporation Act Amendments – Employment and HR – United States – Mondaq News Alerts

Illinois Employers Face Significant New Requirements, Penalties Under Equal Pay Act, Business Corporation Act Amendments – Employment and HR – United States – Mondaq News Alerts

United States: Illinois Employers Face Significant New Requirements, Penalties Under Equal Pay Act, Business Corporation Act Amendments To print this article, all you need is to be registered or login on Mondaq.com. In Short The Situation: Recent amendments to the Illinois Equal Pay Act of 2003 and Illinois Business Corporation Act of 1983 create significant new

United States:

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

To print this article, all you need is to be registered or login on Mondaq.com.

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.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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