Seyfarth Synopsis: On Friday, August 9, 2019, Governor J. B. Pritzker signed a wide-ranging bill that, among other things, encompasses the Workplace Transparency Act. The Act, which will impact nearly every employer in Illinois: significantly restricts inclusion of non-disclosure and non-disparagement provisions in employment agreements, separation agreements, and settlement agreements; purportedly limits an employer’s ability to require mandatory arbitration of sexual harassment or other discrimination claims; mandates annual sexual harassment training; and requires employers to report settlements and adverse judgments to the Illinois Department of Human Rights, and establishes new civil penalties for non-compliance. The new law includes additional requirements specific to restaurants, bars, hotels, and casinos. Those requirements take effect immediately, whereas the broader employment law changes take effect January 1, 2020.

The bill signed by the Governor is SB75, which was passed by the Illinois Senate on June 10, 2019, having passed in the General Assembly earlier that month. As originally drafted, SB75, titled the “Hotel Casino Employee Safety Act,” requires hotels and casinos to provide a safety device or notification device to employees who works in guest rooms, restrooms, or on a casino floor “under circumstances where no other employee is present in the room or area” for summoning help if the employee reasonably believes there is an ongoing crime, sexual harassment or assault or other emergency. SB75, as enacted, also requires hotels and casinos to develop or modify their anti-sexual harassment policies “to protect employees against sexual assault and sexual harassment by guests.”

While SB 75 was pending, an amendment was introduced (and ultimately passed) to add the Workplace Transparency Act (sometimes below “WTA” or the “Act”). Unlike the original Hotel Casino Employee Safety Act, the WTA applies to all employers and creates multiple new substantive protections and compliance requirements, in the name of “ensur[ing] that all parties to a contract for the performance of services understand and agree to the mutual promises and consideration therein, and to protect the interest of this State in ensuring all workplaces are free of unlawful discrimination and harassment.”

New Rules for Employment Contracts and Policies

At the outset, the WTA sets out rules applicable to all employment agreements entered into, extended, or modified on or after January 1, 2020, without exception. These and other agreement-related provisions reflect a legislative trend at the state level in reaction to or as part of #MeToo developments. The Act first provides:

An employer may not enter into a contract or agreement with an employee or applicant, as a condition of employment, promotion, compensation, benefits, or change in employment status or contractual relationship, as a term, condition, or privilege of employment, if that contract or agreement contains a nondisclosure or nondisparagement clause that covers harassment or discrimination as provided under Section 2-102 of the Illinois Human Rights Act. Any such nondisclosure or nondisparagement clause is severable, and all other provisions of the employment contract shall remain in effect.

Second, and notwithstanding that the first provision bars employers from entering into contracts with non-disclosure and/or non-disparagement clauses broad enough to prohibit statements regarding allegations of harassment or discrimination, the Act further provides:

[A]n employer may not enforce or attempt to enforce a nondisparagement clause or nondisclosure clause described in subsection (a) or retaliate against an employee or applicant for reporting, resisting, opposing, or assisting in the investigation of harassment or discrimination as provided in Section 2-102 of the Illinois Human Rights Act.

Taken together, these provisions preclude employers from entering into any contract (or enacting any employment policy) that requires applicants or employees to keep confidential allegations of harassment or retaliation. It also re-enforces anti-retaliation principles with respect to reports of such conduct.

Rules Governing Other Types of Agreements

In addition to these employment contract rules, the Act also restricts discrimination-related confidentiality provisions in other types of agreements.

Unilateral Contracts & Policies

Non-negotiated employment contracts and policies that must be signed as a condition of employment cannot prohibit making truthful statements or disclosures about alleged unlawful employment practices (i.e., discrimination and harassment), unless the following conditions are satisfied:

  • The provision must be in writing;
  • It must demonstrate actual, knowing, and bargained-for consideration from both parties; and
  • It must acknowledge certain fundamental employee rights, including those to:
    • Report good faith allegations of unlawful discrimination or harassment to an appropriate agency;
    • Report good faith allegations of criminal conduct to an appropriate government official;
    • Participate in a proceeding with an appropriate federal, state, or local government agency;
    • Make truthful statements or disclosures required by law, regulation, or legal process; and
    • Request or receive confidential legal advice.

Only if all these provisions are satisfied can any employment contract or policy prohibit making truthful statements or disclosures about alleged discrimination and harassment.

Arbitration Agreements

Where an employee or applicant is required to accept mandatory arbitration as a condition of his or her employment, the arbitration agreement must satisfy all requirements listed above for non-negotiated employment contracts. In addition, the Act contains additional requirements specific to arbitration agreements. It first requires that, to be valid as to any claim, an arbitration agreement must contain a written exception for claims of harassment or other discrimination, and allow the employee to elect whether to bring such claims in either a judicial or arbitral forum.

In addition, unless drafted by the employee, the Act contains a rebuttable presumption that the following provisions are “unconscionable”:

  • Any requirement that claims be resolved in “inconvenient venue”—principally, a venue other than the one where the employee or applicant resides, or where the contract was formed;
  • Any waiver of rights to assert claims or seek remedies provided by state or federal statute (including, presumably, a waiver of the right to assert claims on a class basis);
  • Any waiver of punitive damages;
  • Any shortened statute of limitations; or
  • Any requirement to pay fees and costs in excess of those required to bring claims in court.

These “rebuttable presumptions” are common reasons why other jurisdictions have held arbitration agreements to be unconscionable. However, aspects of the Act that purportedly prohibit mandatory arbitration of harassment and other discrimination claims are plainly in conflict with and likely preempted by the Federal Arbitration Act. How any conflict between the Act and existing federal law will be resolved remains to be seen.

Separation and Settlement Agreements

The Act also establishes detailed limits on confidentiality provisions that are oftentimes included in separation and settlement agreements. While the Act does not limit the parties from agreeing to confidentiality regarding the terms of the agreement itself, it prohibits employers from “unilaterally” including any clause that prohibits an individual from “making truthful statements or disclosures regarding unlawful employment practices.” In order for the parties to agree on valid, enforceable confidentiality provisions related to harassment or other discrimination allegations, the agreement must demonstrate that:

  • Confidentiality mutually benefits both parties, and is the documented preference of the employee, prospective employee, or former employee;
  • The employer has notified the employee, prospective employee, or former employee, in writing, of his or her right to have an attorney or representative review the agreement prior to execution;
  • There is valid, bargained-for consideration in exchange for the confidentiality;
  • The settlement or termination agreement does not waive any claims of unlawful employment practices that have not yet accrued;
  • The employee received the written agreement with at least 21 days to consider whether to sign it; and
  • The employee was given at least 7 calendar days after signing the agreement to revoke it, or expressly waived the right to do so.

The WTA’s 21 and 7-day periods parallel those under the federal Age Discrimination in Employment Act (“ADEA”), as amended by the Older Workers Benefit Protection Act. In order for the employer to obtain a valid age waiver under ADEA, the employee must be provided 21 days to consider the agreement before signing and 7 days after signing in which to revoke the agreement. However, the 21-day ADEA period can be waived (the employee can sign at any point during that period); the same is true under WTA. Under both laws, the agreement takes effect once the revocation period expires (provided the employee hasn’t revoked).

How all this will affect negotiation and execution of discrimination settlements in practice remains to be seen. Things will be different; that much is clear. Up until now, counsel for one or both parties frequently want a harassment settlement signed as soon as possible, lest the other party get cold feet and try to back out. Likewise, judges and mediators who oversee and facilitate settlement encourage signature as soon as possible before the deal can unravel. Under WTA, if an Illinois employee or complainant wants confidentiality, s/he can take up to 21 days to make sure of that; and another 7 days after signing to change his/her mind and revoke.

Exceptions to Limits on Confidentiality

The Act contains only two significant exceptions to the restrictions on an employer’s ability to require confidentiality in employment, separation or settlement agreements.

(1) The Act’s restrictions do not apply to terms of collective bargaining agreement and, to the extent a conflict exists, the terms in the CBA govern.

(2) The Act does not prevent an employer from requiring the following to maintain confidentiality as to allegations made by others:

  • Employees who, as part of their assigned job duties, “receive complaints or investigate allegations relating to unlawful employment practices,” or “otherwise have access to confidential personnel information”;
  • Employees and third parties who are asked to participate in and maintain the confidentiality of an investigation of unlawful employment practices while the investigation is pending and thereafter;
  • Employees and third parties who receive attorney work product and/or attorney-client privileged information implicating an unlawful employment practice as part of any dispute, controversy, or legal claim;
  • Any other individual subject to a legal or evidentiary privilege by law; or
  • Any third party engaged or hired by an employer for the purpose of investigating complaints of an unlawful employment practice.

Enforcement and Remedies

Agreement provisions found to violate any part of the Act will be considered void under Illinois law and severed from the agreement; other agreement terms will remain in effect. Where an employee successfully challenges the enforceability of a contract (but not an employment policy) that is determined to violate the Act, the employee is entitled to recover attorney’s fees and costs incurred in doing so.

Additional Provisions Beyond Those Restricting Contracts

Apart from provisions governing employment, separation and settlement agreements, the Workplace Transparency Act also includes:

IHRA Amendments

The Act amends existing Illinois Human Rights Act protections in three material ways.

(1) It expands the IHRA’s prohibition of harassment and other discrimination based on “perceived” protected characteristics.

  • Previously, causes of action for “perceived” harassment or other forms of discrimination were limited to disability claims. Under the WTA’s expanded protections, employees will be able to pursue claims alleging they were subjected to unwelcome conduct based on a protected characteristic their employer “perceived” them to have, regardless of whether the individual actually has that characteristic.

(2) It amends the IHRA to specifically protect “nonemployees” such as contractors and consultants.

  • This change would allow employers otherwise subject to the IHRA to be held liable for harassing conduct which substantially interferes with an independent contractor or consultant’s work performance, or which creates an intimidating, hostile or offensive working environment for them as members of a protected class.

(3) It clarifies that the definition of “working environment” is not limited to a physical location where an employee is assigned to perform his or her duties.

Mandatory Annual Disclosures

While the bulk of the Workplace Transparency Act is set to take effect January 1, 2020, the Act also provides that, beginning July 1, 2020, covered employers must disclose the following information annually to IDHR:

  • The total number of settlements entered into during the preceding year by the employer or by a corporate executive of the employer that relate to any alleged act of sexual harassment or other discrimination;
  • A breakdown of the number of settlements entered into in the previous year, broken down by the protected characteristic(s) on which the allegation was based;
  • The total number of adverse judgments or administrative rulings against the employer during the preceding year in any discrimination case under any law—federal or state;
  • Whether any equitable relief was ordered against the employer in any adverse judgment or administrative ruling; and
  • The total number of adverse judgments or administrative rulings, broken down by protected characteristics.

Although the information in these disclosures will not be subject to disclosure under a FOIA request, IDHR may use the information to open a preliminary investigation into pattern and practice violations. In addition, failure to comply with reporting obligations could result in civil penalties up to $5,000 per offense, depending on employer size and the number of violations.

Mandatory Annual Sexual Harassment Prevention Training

Upon taking effect, the Act requires employers to provide annual sexual harassment prevention training to all employees, which must at minimum:

  • Define sexual harassment;
  • Provide examples of prohibited conduct;
  • State that it is the employer’s responsibility to prevent, investigate and address sexual harassment; and
  • Summarize federal and state laws addressing sexual harassment, and available remedies for violation thereof.

While there is no word on when it will be available, the Act requires that IDHR make available a model sexual harassment prevention training program that meets these criteria. Once published, employers must either use the model program or establish training that exceeds the minimum standards provided by the model training.

As with the annual disclosures, noncompliance with this section may subject employers to civil penalties up to $5,000 per offense.

Additional Training and Policy Requirements for Bars and Restaurants

The Act would require all bars and restaurants in the state to provide employees a written sexual harassment policy in English and Spanish within the first calendar week of employment, as well as providing supplemental training in English and Spanish.

Amendment to Illinois Victims’ Economic Security and Safety Act (VESSA)

VESSA currently requires employers to provide 8-12 weeks of unpaid, job-protected leave (or other reasonable accommodations) to obtain medical, psychological, or other services after an employee experiences domestic or sexual violence. The Act amends VESSA to include sexual harassment among the qualifying reasons for taking leave under VESSA.

For VESSA purposes, “sexual harassment” need not have any connection to the workplace or employment, and the amendments would allow employees who are the victims of sexual harassment, or whose family members are the victims of sexual harassment, to take job-protected leave to seek treatment or services resulting therefrom. Employees who present a VESSA-qualifying reason for leave may elect to substitute other available paid or unpaid leave, but employers cannot require that they do so.

Employer Takeaways

The WTA is a sweeping law that will impact policies and practices of nearly all employers in Illinois. Accordingly, employers should begin now to review their current agreements and policies to assess whether they are consistent with WTA mandates; if not, agreement templates and policies should be revised—or new ones created—to bring those and the employer’s practices more generally into compliance before the January 1 effective date.

In particular, employers will likely need to evaluate separation agreement and any settlement templates, confidentiality and non-disclosure language in various forms of agreements, and any existing arbitration policies. While the Act does not ban confidentiality agreements or arbitration agreements applicable to sexual harassment outright, it will invalidate those (or the invalid portions thereof) that don’t comply, and subject employers to paying the employee’s attorneys’ fees if the employee prevails in challenging an agreement or policy under the Act.

Besides revising or replacing existing policies and agreement templates, employers will need to start preparing for and planning to implement sexual harassment training that complies with the model training program, once released, as well as for tracking and reporting the information required in the annual disclosures to IDHR.