The trend of reporting pay started with California and has moved to Illinois, which instituted its own phased in reporting requirements. The new amendments to the Illinois Equal Pay Act (IEPA) were signed into law (Senate Bill 1480 (SB 1480)) on March 23, 2021. The certification requirement starts three years from the date of signing into law (March 23, 2024). The previous amendment to the IEPA was in 2019, which prohibits employers from asking salary history of applicants.
The law: The IEPA as previously enacted, is similar to the Federal Equal Pay Act (EPA) and prohibits employers from paying unequal wages to men and women who perform the same or substantially similar jobs, except if the wage differential is based on a seniority system, a merit system, a system measuring earnings by quantity or quality of production, or factors other than an employee’s gender. The IEPA is more expansive than the EPA in that it also prohibits unequal wages for African-American employees on the same basis.
The new pay reporting requirements: The crux of the requirements of the law is that any employer in Illinois with 100 employees based in Illinois are required to obtain from the Illinois Department of Labor (IDOL) an equal pay registration certificate by March 23, 2024 and recertify every two years thereafter. This reporting requirement is different than California’s in that the employer must pay a filing fee and submit a list of all employees employed during the calendar year immediately preceding the Equal Pay Registration Certificate application, separated by gender, race, and ethnicity, which includes the total wages for each reported employee (rounded to the nearest $100).
“Wages” are defined expansively under Illinois law as “wages, salaries, earned commissions, earned bonuses, and the monetary equivalent of earned vacation and earned holidays, and any other compensation owed the employee by the employer pursuant to an employment contract or agreement between the 2 parties.”
It is not an aggregated report like the California reporting is or the former EEO-1 Component 2 report was.
In addition, covered employers must also submit an “Equal Pay Compliance Statement” in which an officer of the company asserts that it is in compliance with state and federal equal pay laws. The Equal Pay Compliance Statement must also state that the business does not discriminate in pay on the basis of minority status (including women, persons of certain racial or ethnic backgrounds, and people with disabilities) when taking into account legitimate business factors such as education and experience. The Equal Pay Compliance Statement must also detail how, and how often, compensation decisions are evaluated, and on what basis or bases compensation is set.
Additional reporting requirements: The law also amends the Illinois Business Corporation Act to require the public-facing reporting of employee demographic data to the Illinois Secretary of State. Along with their annual corporate filings with the Illinois Secretary of State, covered employers must file information “substantially similar” to the demographic data located on Section D of the EEO-1 Report. The Secretary of State will determine the format of such reporting.
The law also denies confidentiality of the data. Beginning in 2023, the Secretary of State will publish the gender, race, and ethnicity data from each covered company on its website within 90 days of filing.
Penalties: The IDOL has been authorized to impose a penalty equal to 1% of a business’ gross profits if the business does not obtain the equal pay registration certificate or if it is suspended or revoked. There is no safe harbor provision; the fact that an employer has received an equal pay registration certificate from the IDOL does not constitute a defense against an IEPA violation.
Given this new law and the fact that confidentiality is an afterthought, employers with operations in Illinois with 100 or more Illinois-based employees should start planning for pay equity analysis at minimum for those employees situated in Illinois. The employer’s attorney should be requesting this information in order to keep analysis confidential and privileged.
Additional ASE Resources
Compensation Consulting - When effectively planned and executed, a comprehensive compensation program can provide a clear understanding of how pay is administered within the organization and what are proper and improper pay practices. ASE can help you design a compensation program that ensures pay discrimination and internal inequity are avoided. ASE can also help you evaluate your current compensation to highlight potential pay disparities. For more information, contact Kevin Marrs.
Source: Lewis Brisbois Bisgaard & Smith LLP 4/25/21, Pay Parity Post 3/29/21