On March 23, 2021, Illinois Gov. J.B. Pritzker signed into law Senate Bill 1480, the Employee Background Fairness Act. This impacts certain Illinois employers because it imposes new reporting and registration requirements concerning employee demographics and pay under the Illinois Business Corporation Act (IBCA) and the Illinois Equal Pay Act (IEPA), and creates new whistleblower anti-retaliation protections under the IEPA. The amendments take effect immediately.

The Illinois Business Corporation Act

SB 1480 amends the IBCA to impose new requirements for domestic and foreign corporations that are organized under Illinois law and are required to file an Employer Information Report EEO-1 (EEO-1) with the Equal Employment Opportunity Commission (EEOC).

The EEO-1 is a report filed with the EEOC and requires that employers report on the racial/ethnic and gender composition of their workforce by specific job categories. All employers that have 100 or more employees are required to file an EEO-1 report annually with EEOC, or if they are covered by Title VII of the Civil Rights Act (i.e. 15 or more employees) and have fewer than 100 employees but are owned by or affiliated with another company and together they have 100 or more employees. Lower thresholds apply to federal contractors. Federal contractors must file EEO-1 repots if they have:

  1. 50 or more employees; and
  2. are prime or first-tier contractors (which means they contract directly with the federal government); and
  3. have a contract, subcontract, or purchase order amounting to $50,000 or more; or
  4. serve as a depository of government funds in any amount, or are a financial institution that is an issuing and paying agent for U.S. savings bonds and notes.

Beginning January 1, 2023, all such applicable employers must include in their annual reports to the state of Illinois information that is substantially similar to the employment data reported under Section D of the corporation’s EEO-1 report (i.e. gender, race, and ethnicity of the corporation’s employees). The Illinois Secretary of State will then publish the gender, race, and ethnicity data of each corporation’s employees on the Secretary of State’s website.

The Illinois Equal Pay Act

SB 1480 amends the IEPA to require private businesses with more than 100 employees in the state of Illinois to obtain an “equal pay registration certificate.” Existing businesses must obtain certificates within three years after the effective date of SB 1480 (i.e. March 23, 2024), while new businesses must obtain certificates within three years after commencing operations. Recertification is required every two years thereafter.

To apply for the equal pay registration certificate, the applicable business must pay a $150 filing fee, submit an equal pay compliance statement to the director of the Illinois Department of Labor, submit a copy of the employer’s most recent EEO-1 report (if subject to EEO-1 reporting requirements) for each county in which the business has a facility or employees, and provide the total wages (as defined by Section 2 of the Illinois Wage Payment and Collection Act) paid to each employee during the prior calendar year separated by gender, race, and ethnicity. The director will issue the equal pay registration certificate to a business that submits a statement signed by a corporate officer, legal counsel or authorized agent of the business certifying that:

  1. The business is in compliance with Title VII of the Civil Rights Act of 1964, the Equal Pay Act of 1963, the IHRA, the Equal Wage Act and the IEPA;
  2. The average compensation for its female and minority employee is not consistently below the average compensation for its male and non-minority employees within each of the major job categories in the employer’s EEO-1 report, taking into account factors such as length of service, requirements of specific jobs, experience, skill set, effort, responsibility, working conditions of the job, or other mitigating factors;
  3. The business does not restrict employees of one sex to certain job classifications and makes retention and promotion decisions without regard to sex;
  4. Wage and benefit disparities are corrected when identified to ensure compliance with the acts referenced in subparagraphs (a) and with subparagraph (b) above; and
  5. Wages and benefits are evaluated to ensure compliance with the acts referenced in subparagraphs (a) and with subparagraph (b) above.

The employer must also indicate on its equal pay registration certificate whether, in setting compensation and benefits, the employer uses:

  1. a market pricing approach;
  2. state prevailing wage or union contract requirements;
  3. a performance pay system;
  4. an internal analysis; or
  5. an alternative approach to determine what level of wages and benefits to pay its employees and it must describe this approach.

An employer who does not obtain an equal pay registration certificate or whose certificate is suspended or revoked after an IDOL investigation is subject to a mandatory civil penalty equal to 1 percent of “gross profits.” And, even if the IDOL issues a registration certificate to the employer, this does not constitute a defense against any IEPA violation found by the IDOL, or a basis to mitigate damages.

Whistleblower Anti-Retaliation Protections Under the IEPA

SB1480 also amends the IEPA to prohibit a business from taking any “retaliatory action” against an employee based on certain protected conduct. “Retaliatory action” means the reprimand, discharge, suspension, demotion, denial of a promotion or transfer, or change in the terms and conditions of employment of any employee of a business taken in retaliation for the employee’s involvement in the following protected activity:

  1. Discloses or threatens to disclose to a supervisor or to a public body an activity, inaction, policy or practice implemented by the business that the employee reasonably believes is in violation of a law, rule, or regulation;
  2. 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
  3. Assists or participates in a proceeding to enforce the provisions of the IEPA.

In addition to having to engage in protected activity, an employee claiming retaliation must also establish that the alleged protected activity was a “contributing factor” in the alleged retaliatory action. The employer has a defense to any such claim if it demonstrates by clear and convincing evidence that it would have taken the same unfavorable personnel action even if the employee did not engage in the alleged protected activity. A prevailing employee may be awarded reinstatement, double back-pay with interest and reasonable costs and attorneys’ fees.

If you have questions about how these changes affect you, please contact an attorney in our Employment & Labor Practice Group.