Alerts and Updates

Illinois employers should begin reviewing and updating their background check policies, practices and forms now in anticipation of changes that will be required to comply with the new requirements.

On January 13, 2021, the Illinois General Assembly passed Senate Bill 1480 (SB 1480), which includes key amendments with new requirements for Illinois employers under the Illinois Human Rights Act (IHRA), the Illinois Equal Pay Act of 2003 (IEPA) and the Illinois Business Corporation Act (IBCA). First, SB 1480 would limit employers’ ability to consider applicants’ and employees’ criminal conviction records when making employment decisions. Second, SB 1480 would broaden the IEPA by requiring employers to obtain equal pay registration certificates from the Illinois Department of Labor (IDOL) on a biennial basis. Third, SB 1480 would amend the IBCA by requiring most employers to submit employee race, ethnicity and gender composition data―similar to information employers include in the federal Employer Information Report (EEO-1)―in their annual corporate report published by the Illinois Secretary of State.

The Legislature sent SB 1480 to Governor J.B. Pritzker for signing on February 5, 2021. The governor has until April 6, 2021, to sign the bill into law as written or to veto it in whole or in part and send it back to the Legislature for further action. If he does not elect to take either action, SB 1480 will become law automatically. As discussed below, if enacted, these amendments will require employers to take swift actions to ensure they do not run afoul of the new legislation, particularly the criminal conviction nondiscrimination and notification provisions that will take effect immediately.

New Limits on Employer Use of Criminal Conviction Records

SB 1480’s amendment to the IHRA prohibits employers from considering applicants’ and employees’ criminal conviction records when making employment decisions, with two exceptions: (1) where a “substantial relationship” exists between the conviction and the employment action at issue; or (2) where granting or continuing an individual’s employment would create an unreasonable risk to safety or property of specific individuals or the public. A “substantial relationship” exists between the conviction and the employment action where the position presents the individual with an opportunity and circumstances to commit similar offenses to those reflected in his or her conviction record.

The bill obligates employers to consider the following mitigating factors in determining whether a conviction is disqualifying: (i) the length of time since the conviction; (ii) the number of convictions represented in the conviction record; (iii) the severity of the conviction and its relationship to the safety of others; (iv) the circumstances surrounding the conviction; (v) the age of the employee at the time of the conviction; and (vi) any evidence of rehabilitation. Before taking any employment action based on a criminal conviction, employers must also engage in an interactive process with the applicant or employee, which includes notifying the individual of: (1) the specific conviction at issue; (2) the employer’s explanation of the reason for disqualification; and (3) the individual’s right to respond. These requirements are similar to those set forth in the EEOC’s enforcement guidance for employers’ consideration of arrest and conviction records under Title VII of the Civil Rights Act of 1964 (Title VII). Under SB 1480, employers must allow the applicant or employee five business days to address the employer’s concerns and notify the applicant or employee of the right to file a charge with the Illinois Department of Human Rights. Similar to employer requirements under the Fair Credit Reporting Act (FCRA), SB 1480 will require Illinois employers to provide both advance written notice of the intent to make an adverse employment decision and final notice of any adverse action taken.

Given the scope of the above amendments, Illinois employers should begin reviewing and updating their background check policies, practices and forms now in anticipation of changes that will be required to comply with the new requirements.

Employers Would Be Required to Obtain New Equal Pay Registration Certificates from IDOL

SB 1480 also adds a new provision to the IEPA requiring businesses to obtain an equal pay registration certificate from the IDOL within three years of the effective date of the bill (or within three years of commencing operations for new businesses) and every two years thereafter. Any private employer that has more than 100 employees in the state of Illinois is subject to this requirement.

To receive their certificates, businesses must submit an application which includes a list of employee composition data separated by gender and race/ethnicity (substantially similar to data employers report in an EEO-1), as well as the total wages paid to each employee in the prior calendar year. The application also must include a signed certification by a corporate officer, legal counsel, or authorized agent of the business which confirms, among other things, that the employer complies with the requirements of the state and federal anti-discrimination and equal pay laws (e.g., IHRA, Title VII, and state and federal equal pay laws) and that the employer does not restrict or differentiate between employees in position or pay based on gender or minority status. The required employer certification must also include information on the employer’s compensation and benefit setting and disparity correction practices. SB 1480 requires businesses with multiple facilities in the state to submit one single application for all Illinois operations along with a $150 application fee.

Employer applications that do not comply with these and other requirements under the bill will have their applications rejected by the Director of the IDOL within 45 days. This may also lead to revocation or suspension of previously issued equal pay registration certificates. In considering whether to issue an equal pay registration certificate, the Director will have authority to investigate an employer’s submitted application and certification, including taking depositions and issuing subpoenas for relevant documents. Failure to comply with the IDOL’s investigation could lead to legal contempt proceedings against businesses. Businesses that fail to obtain an equal pay registration certificate are subject to a civil penalty in the amount of 1 percent of their gross profits. An administrative hearing process will be available to employers to contest IDOL decisions, but given the civil penalty, the risks and consequences of revocation, suspension or denial of the equal pay registration certificate are significant under the bill.

Additional Annual Corporate Reporting Requirement for Employee Composition Data

Finally, similar to the California Legislature’s efforts to increase employer transparency, SB 1480 adds another reporting obligation for employers required to file annual reports with the Illinois Secretary of State under the IBCA. Domestic and foreign corporations organized under Illinois law or authorized to conduct business in Illinois (with identified exceptions) will be required to include employee composition data in their annual benefit reports filed with the Illinois Secretary of State. Any Illinois corporation that is required to file a federal EEO-1 report will be subject to this requirement, which generally includes any private employer with at least 100 employees (as well as certain federal contractors with 50 or more employees). The required report will include employee composition data substantially similar to that included in the EEO-1 report, including employee gender, race and ethnicity. However, unlike EEO-1 reports which are not made public, the Illinois Secretary of State will publish employee composition data reports within 90 days of receipt of the corporation’s annual report. If enacted into law, this new reporting mandate takes effect with annual reports required to be filed on and after January 1, 2023.

What This Means for Employers

Governor Pritzker has not signaled how he intends to act on the bill. If SB 1480 becomes law as written, employers who use criminal conviction records in making employment decisions must be prepared to implement necessary compliance changes to their criminal conviction consideration and notification procedures and processes. Because SB 1480 is scheduled to take effect immediately upon becoming law, Illinois employers should consult with legal counsel and be prepared to enact swift changes to their employment policies and practices related to criminal conviction history. At a minimum, employers should contact their background check vendors now to ensure that any forms or processes will be updated upon the passage of the bill.

The equal pay registration certification requirement will also require employers to thoroughly evaluate the information submitted in light of the significant potential consequences during the IDOL’s review of the employer’s certification. Employers have three years to prepare for this registration process, and we expect the IDOL to publish registration certification forms and processes that employers should review with counsel for additional compliance requirements.

Finally, Illinois corporations must consider the impact of having their EEO-1 employee composition data being publicly available beginning with annual reports filed in 2023. Currently, an employer’s federal EEO-1 report data is only published by the EEOC in aggregate, nonidentifiable formats. With the possibility of this data becoming publicly available, employers should reevaluate the accuracy and scope of their EEO-1 reports (e.g., identified locations, operating companies, subsidiaries, etc.) and the internal processes and persons responsible for the EEO-1 report compilation process.