Pay Equity Reporting Requirements

Now is the time for employers to report pay equity data to the Illinois labor department

For those larger Illinois employers, who have not yet reported payroll and diversity data to the Illinois Department of Labor (the “IDOL”), now may be the time. The IDOL recently issued guidance to help employers navigate their reporting requirements (the “Guidance”).

In March 2021, Governor J.B. Pritzker signed an amendment to the Illinois Equal Pay Act of 2003 (the “Act”).  The amendment requires private businesses with 100 or more employees in Illinois, that are required to file an EEO-1 report with the Equal Employment Opportunity Commission (“Covered Employers”), to report certain employee payroll and diversity information to the IDOL. It also requires Covered Employers to apply for an Equal Pay Registration Certificate (“EPRC”). The law imposes some of the nation’s most expansive and rigorous reporting requirements. See generally 820 ILCS 112/11.  Employers’ reporting obligations began on March 24, 2022.

The Guidance helps clarify which employers are “Covered Employers” for purposes of the Act.  The Guidance explains a Covered Employer’s total number of employees is the total number of people who worked in or were based out of Illinois on December 31 of the 12-month calendar year immediately prior to their EPRC application submission. The Guidance further provides Illinois-based employees should be included in the total employee count, even if they work remotely outside of Illinois. A business with multiple locations must only include those employees who work for an Illinois location.

The Act contains two separate reporting requirements. First, Covered Employers must submit:
 

1. A copy of their most recently filed EEO-1 report; and
2. A list of all employees employed during the past calendar year. The employees must be categorized by gender, race and ethnicity.  The list also must contain each employee’s start date; the total wages paid to each employee during the past calendar year; and “any other information the Department [of Labor] deems necessary to determine if pay equity exists among employees.”

The Guidance clarifies two important points concerning this reporting requirement. One, the Guidance explains “wages” means any compensation paid to an employee, including wages, salaries, earned commissions, earned bonuses, stock and ownership shares but does not include retirement, health, or other fringe benefits. Two, the Guidance explains when reporting employee data for promoted employees, employers should list the employee’s original hire date, and then list the termination date as the date the employees were promoted. Employers should then create another row in the spreadsheet for that same employee with the “hire” date as the promotion date. Notwithstanding, neither the Guidance nor the Act defines what constitutes “any other information the Department deems necessary to determine if pay equity exists among employees.”

Second, Covered Employers must submit a signed certification of compliance with the Act and other relevant anti-discrimination laws. Specifically, the Covered Employer must attest:
 

• The average compensation for female and minority employees is not consistently below the average compensation for male and non-minority employees within each of the major EEO-1 job categories for which the employee is expected to perform work, taking into account factors such as length of service, requirements of specific jobs, experience, skill, effort, responsibility, working conditions of the job, education or training, job location, use of a collective bargaining agreement, or other mitigating factors;
• Employees of one sex are not restricted to certain job classifications;
• Retention and promotion decisions are made absent consideration of sex;
• When identified, the employer corrects wage and benefit disparities;
• The frequency of which wages and benefits are evaluated; and
• The approach the employer takes when evaluating the wages and benefits that will be paid.

Covered Employers authorized to transact business in Illinois as of March 23, 2021 must submit an application to obtain an EPRC, between March 24, 2022 and March 23, 2024, and must recertify every two years thereafter. A business with employees in multiple Illinois locations or facilities must submit a single application to the IDOL for all of its Illinois operations. Pursuant to the Guidance, employers should visit the IDOL Business Registration Page and submit their business’ contact information to determine whether they are a Covered Employer for purposes of the Act. If so, then the IDOL will put the business on the list to provide a deadline to submit the application (within the two-year response timeframe).

If a business does not currently have more than 100 employees, registration is unnecessary. However, if a business’ workforce surpasses 100 employees, the business must submit its contact information to the IDOL. Further, any business with more than 100 employees but not authorized to transact business in Illinois until after March 23, 2021, must submit an application to obtain a certificate within three years of commencing business operations, but not before January 1, 2024, and must recertify every two years thereafter.

The Act’s nuanced reporting requirements underscore the caution and care employers must exercise in adhering to their obligations. Notably, the IDOL’s failure to assign a business a registration date does not exempt the business from compliance with the Act’s reporting requirements. However, should the IDOL determine a business has failed to comply with the Act, it may consider its own failure to notify a business of the recertification deadline as a mitigating factor.

Failure to comply with the Act’s reporting requirements has serious repercussions. Non-compliant employers may receive a penalty “up to $10,000” for “a violation.” Neither the Act nor the Guidance clarifies whether a business can be subject to fines for multiple, separate Section 11 violations.  See 820 ILCS 112/11.

To the extent Covered Employers have not already performed pay equity audits to ensure they can properly certify compliance with the Act’s requirements, they should promptly do so to rectify any disparate pay practices. Sheppard Mullin regularly audits employer pay equity practices to ensure compliance with the latest employment law developments.

This article first appeared here.

Shawn Fabian is a Partner in the Labor and Employment Practice Group at Sheppard Mullin. Shawn represents management-side clients before federal and state courts across the country and before administrative agencies, including the DOL, EEOC, NLRB and various state and municipal human rights commissions and labor agencies. He also regularly represents clients in arbitrations and other avenues of alternative dispute resolution. Visit www.sheppardmullin.com  Connect Shawn Fabian

Katherine H. Oblak is an Associate in the Labor and Employment Practice Group at Sheppard Mullin. Katherine’s practice covers a wide range of employment litigation and counseling. She defends employers in state and federal courts and before various administrative agencies such as the Equal Employment Opportunity Commission and the Illinois Department of Human Rights. Visit www.sheppardmullin.com  Connect Kate (Tresley) Oblak