As employers prepare for the new year, the following is a high-level overview of Illinois employment law developments on the horizon:
Major Change in Illinois Restrictive Covenant Law Effective January 1
Illinois is home to perhaps the most significant transformation in non-competition and non-solicitation law nationwide over the past year. Effective January 1, an amendment to the Illinois Freedom to Work Act ("IFWA") will impose certain restrictions on the use of restrictive covenants that are entered into on or after that date. Here are the key takeaways:
- Employers are prohibited from (1) entering into non-compete agreements with employees who earn $75,000 per year or less, and (2) entering into non-solicit agreements with employees who earn $45,000 per year or less.
- For non-compete agreements, the salary threshold amounts will increase every five years by $5,000 until 2037, when the amount will equal $90,000. For non-solicit agreements, the threshold will increase every five years by $2,500 until 2037, when the amount will equal $52,500.
- Employers must advise employees to consult with an attorney before entering into a non-compete or non-solicit agreement, and also give employees at least 14 days to review and decide whether to sign the agreement. Employees have the option of signing the agreement before the 14-day period has lapsed.
- Employers must provide “adequate consideration” at the time an employee signs the non-compete or non-solicit agreement, or after the employee has worked for the employer for two years. The most common example of adequate consideration is financial benefits (i.e., money). “Professional benefits” can also constitute adequate consideration, however the amendments do not definite or provide examples, yet it can be reasonably assumed that this could include extra time off or other fringe benefits.
- Restrictive covenants are unenforceable if an employee was terminated or furloughed due to the COVID-19 pandemic or to “circumstances that are similar to the COVID-19 pandemic,” unless enforcement of the restrictive covenant agreement includes the receipt of compensation equivalent to the employee’s base salary at the time of termination for the period of enforcement, minus any compensation earned through subsequent employment.
- An employee can recover attorneys’ fees and costs from an employer if the employee is the prevailing party in a civil lawsuit or arbitration filed by an employer to enforce a restrictive covenant.
- The Illinois Attorney General may investigate employer conduct when there is “reasonable cause” to believe that an employer is engaged in a pattern or practice prohibited by the IFWA. The Illinois Attorney General may seek compensatory damages and equitable remedies against employers, including monetary penalties of $5,000 per violation or $10,000 for each repeat violation within a five-year period.
Notably, the amendments are not retroactive, so they apply only to non-compete and non-solicit agreements entered into on after January 1. Although employees do not need to re-negotiate existing agreements, they should revisit and update their agreements on a go-forward basis to ensure compliance with the new law.
Additional Amendments to Equal Pay Certification Requirements
In March 2021, Illinois amended the Illinois Equal Pay Act imposing new equal pay compliance requirements on any private employer with 100 or more employees. More information about these initial amendments can be found here. In June 2021, additional amendments to the Equal Pay Act were enacted, providing significant updates and clarifications, including:
- More condensed timeline to obtain the required equal pay certification;
- Additional reporting requirements related to employee demographics;
- Additional wage comparison factors;
- Revised compensation-setting factors;
- Revised pay data protection provisions;
- Amended penalty provisions; and
- New appeals procedure.
Employers with 100 or more employees in Illinois will be required to obtain an “equal pay registration certificate” from the Illinois Department of Labor ("IDOL"). Employers must apply between March 24, 2022 and March 24, 2024. Notably, the specific deadline for each employer will fall within this window and will be assigned by the IDOL, presumably in the near future.
In order to obtain this certificate, employers must apply with the following: (1) a $150 filing fee; (2) a copy of the employer’s most recently filed EEO-1 report; (3) a list of total wages paid to each employee during the previous calendar year, broken down by gender, race, and ethnicity; (4) details about each employee’s start date and county of work; and (5) any other information the IDOL deems necessary to evaluate pay equity.
Within 45 days of receipt of this information, the IDOL will issue an equal pay registration certificate or a statement explaining why the application was denied. If denied, employers will have 30 days to cure any deficiencies and resubmit their application before any penalties.
Given the scope of information requested and the upcoming deadline, organizations should begin to take steps to ensure compliance with these equal pay certification requirements in the near term, including conducting thorough pay audits.
State Minimum Wage Increase
Effective January 1, the minimum wage in Illinois will increase to $12 per hour, and the minimum wage for qualified tipped employees will increase to $7.20 per hour. Some counties and cities have higher minimum wages. The minimum wage in Chicago is $15 per hour for employers with more than 20 employees, and $14 per hour for employers with 4 to 20 employees. The minimum wage in suburban Cook County is $13 per hour.
Illinois Provides Job-Protected Time Off for Victims of Violent Crimes
Under the Victim’s Economic Security and Safety Act ("VESSA"), an employee who is a victim of domestic, sexual, or gender violence – or who has a family or household member who is a victim of domestic, sexual, or gender violence – may take up to 12 weeks of job-protected leave during any 12-month period. If the employer has 15-49 employees, the employee may take up to 8 weeks. If the employer has 14 or less employees, the employee may take 4 weeks. Like the Family Medical Leave Act ("FMLA"), an employee returning from VESSA leave is entitled to be restored to the position the employee held before leave began.
Effective January 1, an amendment to VESSA allows employees to take leave if they or a covered family or household member is a victim of any “crime of violence.” This includes “any conduct proscribed by Articles 9, 11, 12, 26.5, 29D, and 33A of the Criminal Code of 2012 or a similar provision of the Criminal Code of 1961.” These code sections relate to homicide, sex offenses, bodily harm, harassing and obscene communications, terrorism, and armed violence.
The definition of “family or household member” has also been expanded to include a spouse or party to a civil union, parent, grandparent, child, grandchild, sibling, or any son, daughter, other person related by blood or by present or prior marriage or civil union, other person who shares a relationship through a child. It also includes any other individual whose close association with the employee is the equivalent of a family relationship as determined by the employee.
Expansion of Disability Discrimination Protections Under Illinois Human Rights Act
The Illinois Human Rights Act ("IHRA") prohibits employers from discriminating on the basis of, among other things, an individual’s physical or mental disability, if the disability is unrelated to the individual’s ability to perform the job in question. Effective January 1, disability discrimination includes discrimination against an individual based on the individual’s association with a person with a disability. The amendment to the IHRA is now in line with the federal Americans with Disabilities Act ("ADA"), however the ADA applies to employers with 15 or more employees and the IHRA applies to all employers regardless of size.
Further Restriction on the Use of Artificial Intelligence in Interviews
Since January 1, 2020, Illinois has regulated the use of artificial intelligence (“AI”) in the hiring process under the first-of-its-kind Artificial Intelligence Video Interview Act, requiring that employers: (1) notify applicants before the interview that such technology may be used; (2) provide applicants with information before the interview on how the AI technology works and its general characteristics; (3) obtain applicants’ prior consent to be assessed by AI technology; (4) maintain the confidentiality of such videos and share with only those whose expertise or technology is necessary in order to evaluate applicants’ fitness for a position; and (5) destroy all copies within 30 days of applicants’ requests.
Beginning January 1, 2022, if an employer relies solely on an AI analysis to determine whether an applicant will be selected for an in-person interview, then the employer is required to collect and report demographic data to the Illinois Department of Commerce and Economic Opportunity on an annual basis. Specifically, the employer must collect: (1) the race and ethnicity of applicants who are and are not given an in-person interview after the use of AI analysis; and (2) the race and ethnicity of those applicants who are ultimately hired. Beginning December 31, 2022, covered employers must report annually the data collected during the preceding 12-month period ending November 30.
Of course, employers must continue to comply with the Illinois Biometric Information Privacy Act, which also presents implications for the use of AI.
New Health Insurance Disclosure Requirement
The Illinois Consumer Coverage Disclosure Act ("CCDA") was enacted on August 27, 2021 and became effective immediately. The CCDA requires Illinois employers to disclose to all new employees who are eligible for group health insurance coverage, as well as all group health plan participants annually and upon request, a comparison between benefits provided under the plan and the “essential health benefits” required by the Illinois Department of Insurance for individual and small group health insurance coverage. The CCDA does not impose coverage requirements on employers. It only requires disclosure to employees about available coverage compared to these essential health benefits. The notice can be sent by email or posted on the employer’s website. This requirement applies to all employers regardless of size, including those providing ERISA and/or self-insured plans.
The Illinois Department of Labor is responsible for enforcement and can fine employers for noncompliance. The IDOL published some helpful FAQs that can be found here.
Employers should consult with their insurers, brokers, third-party administrators, and/or counsel to develop a plan for complying with this new disclosure requirement.
Illinois Expands Mandatory Secure Choice Retirement Savings Program
The Illinois Secure Choice Retirement Savings Program ("SCRSP") is a Roth individual retirement account for private sector employees who lack access to employer-sponsored retirement plans. Initially, the SCRSP applied only to employers with 25 or more employees that had been operating for at least two years and did not offer a qualified plan. Recent legislation expands the SCRSP to cover employers with five or more employees. Employees continue to have the right to opt out, and employers are not required to make contributions.
Under the SCRSP, covered employers must distribute certain information regarding the program, facilitate employee enrollment in the program, and implement and remit employee payroll deduction contributions to the program.
Covered employers will receive notifications of their obligations and applicable deadlines. The enrollment deadline for employers with 16-24 employees will be no sooner than September 1, 2022. The enrollment deadline for employers with 5-14 employees will be no sooner than September 1, 2023.
Reminder: Annual Sexual Harassment Prevention Training
A friendly reminder that Illinois employers are required to provide annual sexual harassment prevention training to all employees meeting the requirements proscribed by the Illinois Department of Human Rights. More information can be found here.
We recommend Illinois employers revisit and update their policies and practices to ensure legal compliance with the many legislative changes over the past year and on the horizon. Gordon & Rees attorneys are available to provide assistance with these and other workplace issues.
This material is provided for informational purposes only. It is not intended to constitute legal advice nor does it create a client-lawyer relationship between Gordon Rees Scully Mansukhani and any recipient. Recipients should consult with counsel before taking any actions based on the information contained within this material.