Significant New Pay and EEO Reporting Obligations on the Horizon for Illinois Employers

Seyfarth Synopsis: Yesterday, Governor Pritzker signed SB 1480 into law.  The law will require the submission of data regarding wages by employee race and gender, verification of compliance with certain non-discrimination laws, and the production of EEO-1-style reports (i.e., workforce data by race and gender separated into prescribed job categories) from Illinois employers with more than 100 employees. Failure to obtain an Equal Pay Certificate “shall” carry a civil penalty “in an amount equal to 1% of the business” gross profits.

On the eve of Equal Pay Day 2021, Illinois Governor J.B. Pritzker signed a major new piece of legislation purportedly designed to target equal pay issues. Senate Bill 1480 amends the Illinois Equal Pay Act of 2003 (“IEPA”) and the Illinois Business Corporation Act (“IBCA”) to collect employee demographic and pay data and related information.  The law will also provide enhanced employment protections to ex-offenders through an amendment to the Illinois Human Rights Act (“IHRA”), as described in more detail in this Alert.

Under the new law, Illinois joins California to become only the second state to require the collection and production of workforce pay data from private employers. The Illinois law goes even further by requiring that employers proactively verify compliance with certain state and federal laws. These certifications are collectively the “Equal Pay Registration Certificate” requirements.  The first report will be due in three years, or on March 23, 2024 absent revisions to the law.  The failure to obtain an Equal Pay Registration Certificate, or revocation or suspension of a Certificate carries significant penalties. Specifically, the law provides that the Department “shall impose” “a civil penalty in an amount equal to 1% of a business’ gross profits.”

The law also amends the IBCA to require that Illinois employers provide employee race, ethnicity and gender demographic data to the state of Illinois as part of its annual IBCA filing.  The report will be similar to data contained in the Employer Information Report EEO-1 (the “EEO-1”) filed with the federal Equal Employment Opportunity Commission (the “EEOC”).  However, unlike the federal EEO-1, which is confidentially maintained by the EEOC, the report filed in Illinois will be published publicly by the Illinois Secretary of State within 90 days of filing. Employers will be required to submit this new data with their first annual report filed on or after January 1, 2023. 

Which Employers Are Impacted by the IEPA and IBCA Changes?

The Equal Pay Registration Certificate obligations apply to private employers with more than 100 employees in the State of Illinois.  The amendments to the Business Corporation Act for the collection of EEO-1 type data applies to domestic corporations organized under any general law or special act in Illinois authorizing the corporation to issue shares as well as foreign corporations authorized to transact business in the state of Illinois, who are also required to file a federal EEO-1 report. 

IEPA’s Equal Pay Registration Certificate

Employers with more than 100 Illinois employees will be required to apply for an Equal Pay Registration Certificate. The somewhat good news is that employers have some time to gather the information needed to apply for the Equal Pay Registration Certificate. The law was enacted yesterday, which means that employers have until March 23, 2024, or three years, to submit their applications.  The Certificate application will have two components: the pay report and a compliance statement that must be signed by a corporate officer, legal counsel, or authorized agent.

The pay report component will require that covered employers submit data concerning the pay, gender and race/ethnicity categories as reported in the employer’s most recently filed EEO-1 report.  The total wages earned are those as defined by Section 2 of the Illinois Wage Payment and Collection Act.

The second component of the Equal Pay Registration Certificate application is an equal pay compliance statement that confirms:

• The employer’s compliance with Title VII of the Civil Rights Act of 1964 and the Equal Pay Act of 1963, as well as state law requirements under the Illinois Human Rights Act, the Equal Wage Act, and the Equal Pay Act of 2003;
• That the average compensation for female and minority employees is not “consistently below” the average compensation “as determined by rule by the United States Department of Labor” for the employer’s male and non-minority employees within each EEO-1 major job category. In comparing these compensation averages, employers are instructed to take into account factors such as length of service, job performance, job responsibilities, experience, and other mitigating factors.  Neither the term “consistently below” nor the cited federal Department of Labor’s “rule” are defined in the Act;
• That the company does not relegate one sex to certain job classifications, and that it “makes retention and promotion decisions without regard to sex”;
• That any wage disparities are corrected when they come to the attention of the employer in order to ensure compliance with state and federal antidiscrimination laws; and
• How often the employer evaluates wages and benefits to ensure compliance with anti-discrimination laws.
• Employers must also provide information which describes the method the employer uses to set compensation and benefits, including specifically whether it utilizes a market pricing approach, a state prevailing wages/union contract requirement, a performance pay system, an internal analysis, or an alternative approach to determine the level of wages and benefits paid to employees.

Importantly, the data and information provided to the IDHR either in connection with the Equal Pay Report and the Equal Pay Compliance Statement, or via a request from the Department will be not made publicly available. However, the Department’s decision to grant, revoke, or suspend an employer’s Certificate is public information.

Deadline for the First IEPA Equal Pay Registration Certificate

As previously noted, The Equal Pay Registration Certificate will be due within 3 years of yesterday’s enactment of the law or on March 23, 2021, absent modifications or revisions. 

Businesses who reach the 100 employee threshold after the effective date of the Act will have three years to obtain their first certification from the IDHR. Also, employers receiving authorization to do business in Illinois at some point after this Amendment’s effective date will have three years from the date they receive such authorization to acquire their first Equal Pay Registration Certificate.

All businesses must then recertify on a biennial basis after their first submission.

Enforcement of the Requirements

Upon receipt of the employer’s completed application, the IDHR will have 45 days to issue the Equal Pay Registration Certificate or reject the application.  Notably, issuance of the certificate does not establish that an employer is in compliance with the IEPA, nor does it provide a defense to any Equal Pay Act violation identified by the IDHR.  

The law also provides that IDHR may revoke or suspend a certificate from employers who fail to make good faith efforts to ensure compensation for male and non-minority employees is not routinely more than that of women and minorities, or if the company persistently violates state or federal equal pay laws.  Before revoking or suspending the certificate, the IDHR must first engage in a conciliation with the business regarding its pay practices.  The IDHR may also choose to investigate the employer’s pay practices using witness interviews, depositions, subpoenas, and inspection of its business records.  The law provides for an administrative review process in the event an employer believe their certificate was wrongly revoked or suspended.

The new law also allows IDHR to audit employers to ensure compliance with the requirements.  At the IDHR’s request, employers must provide data concerning the number of male and female employees, average salary data, general information about the employers compensation and benefits, and other data the employer or IDHR deems necessary to assess compliance with equal pay obligations.  All data must be organized using the EEO-1’s major job categories. 

The Act also provides whistleblower protections for employees.

SB 1480 Will Make EEO-1 Like Data Publically Available Through Amendment to the IBCA

In another big change, beginning in 2023, EEO-1-like information may be publicly available for each Illinois employer. As previously noted, the law also amends the Illinois Business Corporation Act.  The IBCA requires that covered corporations file an annual report to keep a corporation in good standing with the State of Illinois.

Beginning with the annual report filed on or after January 1, 2023,  Illinois corporations subject to the IBCA that are also required to file a federal EEO-1 report with the EEOC, will be required to annually file information that is substantially similar to the demographic data provided the EEOC in a format approved by the Illinois Secretary of State.

In contrast to the EEO-1, which is confidentially maintained by the EEOC, the Illinois Secretary of State will publish each corporation’s data on the gender, race, and ethnicity of its workforce within 90 days of filing.  This is a significant departure from the laws governing the collection of the EEO-1 data on a federal level as well as any other state requirement.

Concerns with Illinois Law

As with other pay data collection laws, the Illinois law suffers from key flaws that may blunt the law’s undefined purposes and effects.

For starters, it is unclear how Illinois intends to use or process the information.  A press  release from the Governor’s office yesterday, provides that SB 1480 “strengthens the Illinois Equal Pay Act” through the equal pay registration certificate.  However, there is virtually no alignment between the Illinois Equal Pay Act and EEO-1 job categories.  For example, one job category in the EEO-1 is the “Professionals” category.  In a hospital setting, the “Professionals” group could include a large variety of jobs including doctors, lawyers, accountants, consultants, and nurses. Such jobs are not comparable for purposes of comparing pay under the Illinois Equal Pay Act.  Thus, there is no meaningful analysis that can be done to identify potential pay discrepancies yet employers will be required to comply with extensive and burdensome new data requests.   

The law also requires that employers certify that average compensation for female and minority workers is not “substantially below” the average compensation for male and non-minority workers. However, there is no definition of how the legislature defines “substantially below,” leaving employers to wait for interpretative guidance from the Illinois Department of Labor.

There are also significant data privacy concerns with the publication of the EEO-1 data in connection with the ICBA amendment that the law does not fully address.  Similarly, the protections available to employers regarding information provided pursuant to the equal pay compliance registration is unclear and may not protect sensitive employer data from being publicly accessed pursuant to a Freedom of Information Act request. 

Actions Employers Should Take in Light of Illinois’ New EEO and Pay Data Collection Requirements

Employers have three years before the first IEPA’s Equal Pay Registration Certificate application is due.  Despite this long runway,  businesses should begin scrutinizing compensation practices to ensure that they will be positioned to certify pay compliance. To that end, employers should conduct a more fulsome pay equity analysis sooner rather than later.  This will allow ample time to identify and correct any issues before filing the application, making the eventual application process run more smoothly.  Moreover, with the passage of this law, employers can rest assured that pay equity will become a greater focus of the IDHR in the coming years, so it is prudent for employers to take steps to ensure compliance now. 

Finally, with the impending collection and disclosure of the EEO-1-like reports beginning in 2023, employers should also review their EEO-1 filings to ensure that workers are properly aligned to the correct EEO-1 categories and prepare internal stakeholders that this information will be released in the future.

Seyfarth Shaw’s Pay Equity Group leads the legal industry in thought leadership, privileged fair pay analyses, and employer advocacy on issues relating to pay equity. As always, we are ready to help guide you through this process.