Recent final regulations made a series of 2021 amendments to the Illinois Equal Pay Act effective as of December 22, 2022. The amendments generally require private employers with 100 or more employees in the State of Illinois to obtain an “equal pay registration certificate” from the Illinois Department of Labor and expand certain reporting requirements, making the law one of the most far-reaching state equal pay laws in the United States.
Illinois Governor Pritzker signed into law amendments to the Illinois Equal Pay Act (IEPA), as well as certain other laws, on March 23, 2021. On June 25, 2021, the state further amended the IEPA with substantive changes, including an expansion of certain reporting requirements. Now, 18 months later, the Illinois Department of Labor (IDOL) has adopted final regulations implementing these amendments to the IEPA.
In sum, a private employer “business” that has 100 or more employees in the State of Illinois is required to obtain an “equal pay registration certificate” from the IDOL by filing an application with the agency between March 24, 2022, and March 23, 2024, and recertifying every two years thereafter.
The application date for each business will be determined by the IDOL. After collecting contact information from existing businesses, the IDOL will assign each covered business a deadline by which it must apply for the equal pay registration certificate. Importantly, under the IEPA, the IDOL’s “failure to assign a business a registration date does not exempt the business from compliance with” the IEPA’s certification requirements.
Businesses that have not yet been contacted by the IDOL—or that have recently met the 100-employee threshold—may wish to ensure that the IDOL has their accurate contact information by filling out this survey on the IDOL website (as noted, this prior informal admonition is now a requirement under the IDOL regulations).
Applying for the Equal Pay Registration Certificate
On or before a covered business’s deadline, the IEPA requires the business to provide a list of all Illinois employees during the last calendar year, separated by gender and the race and ethnicity categories as reported in the employer’s most recently filed EEO-1 report. [1] The list must include
(i) the county in which each employee works;
(ii) the date each employee started working for the business;
(iii) any other information the IDOL deems necessary to determine if pay equity exists among employees; and
(iv) the total wages (as defined by the Illinois Wage Payment and Collection Act, further clarified by the IDOL’s FAQs to include IRS Form W-2 Box 5 compensation amounts) paid to each employee during the last calendar year, rounded to the nearest hundred dollars.
The covered business must also provide a statement (the Equal Pay Compliance Statement), signed by a corporate officer, legal counsel, or authorized agent of the employer, certifying
(i) “that the business is in compliance with [the IEPA] and other relevant laws, including but not limited to: Title VII of the Civil Rights Act of 1964, the Equal Pay Act of 1963, the Illinois Human Rights Act, and the Equal Wage Act”;
(ii) “that the average compensation for its female and minority employees is not consistently below the average compensation” for its male and nonminority employees within each of the major job categories in the EEO-1 report, “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”;
(iii) “that the business does not restrict employees of one sex to certain job classifications, and makes retention and promotion decisions without regard to sex”;
(iv) “that wage and benefit disparities are corrected when identified to ensure compliance with the Acts cited in item (i)”;
(v) “how often wages and benefits are evaluated”; and
(vi) “the approach the business takes in determining what level of wages and benefits to pay its employees; acceptable approaches include, but are not limited to, a wage and salary survey.”
The IEPA clarifies that a “business that has employees in multiple locations or facilities in Illinois shall submit a single application to the Department regarding all of its operations in Illinois.” Templates of the requisite employee data file format and Equal Pay Compliance Statement (along with other guidance and instructive information) are available on the IDOL’s website.
Certification
The IDOL generally must issue an equal pay registration certification or a statement of why the application was rejected within 45 calendar days of receipt of the application. Businesses applying for certification will have the opportunity to cure any deficiencies with their application that led to a rejection, and may resubmit the revised application to the IDOL within 30 calendar days of receiving the rejection. Employers also may appeal rejected applications.
The IDOL may suspend or revoke a previously issued equal pay registration certificate when the business fails to make a good-faith effort to comply with the statutes identified in item (i) of the Equal Pay Compliance Statement list above or with the IEPA’s certification requirements, or has multiple violations of such requirements or statutes—provided that the IDOL must first seek to conciliate with the business regarding wages and benefits due to employees.
Recertification
Covered employers still must recertify every two years after their initial certification, with recertification deadlines again determined by the IDOL. Employers again should note that the IDOL’s failure to notify an employer of its recertification deadline does not excuse noncompliance, but “may be a mitigating factor when making a determination of a violation.”
Employers should be aware that current employees may request anonymized data regarding their job classification or title and the pay for that classification from the IDOL, but “no individually identifiable information may be provided to an employee.” This process—and the information available to requesting employees—is detailed in the new adopted regulations.
The IEPA also includes other provisions regarding, among other things, the IDOL’s investigative powers, various administrative procedures, and remedies.
The adopted final regulations, published in January 2023 and effective as of December 22, 2022, are, with a few notable exceptions, substantially similar to the proposed regulations published in May 2022. The following is a high-level summary of various provisions of the complex final regulations:
Clarify When Employees Count Toward 100-Person Threshold
A principal question under the IEPA is when an employee counts as an employee “in the State of Illinois.” Existing FAQs on the IDOL website provide that “remote” employees working outside Illinois generally should be included in the employer’s application when they are employed by an Illinois-based business:
16. My business is based in Illinois, but some of my employees work remotely in places outside of Illinois. Should I include these employees when determining my total number of employees for reporting purposes?
Yes. All employees of a business based in Illinois should be included in the total employee count, even if the employees are working remotely outside of Illinois. A business with multiple locations should include only the employees whose base location is in Illinois.
At the same time, this formulation still raises questions as to, for example, what constitutes a “business based in Illinois” and an employee of such a business, particularly for employers with more extended and/or complex organizational structures.
The adopted regulations (like the initial proposed regulations) attempt to put a finer point on this issue and define “Employee”—solely for purposes of the IEPA’s equal pay registration certification requirements—to include any person “whose base of operations, or if there is no base of operations, the place from which the service is directed or controlled, is located within the State of Illinois.” The regulations further provide that if an employee’s “base of operations or the place from which the service is directed or controlled is not in any state in which some part of” their work is performed, then for purposes of the IEPA’s certification requirements, they are counted if their residence is in Illinois.
This definition of employee expressly cites and incorporates Section 304(a)(2)(B)(iii) of the Illinois Income Tax Act (IITA) (35 ILCS 5/304(a)(2)(B)(iii)), which uses substantially similar provisions in determining whether and to what extent the “business income of a person other than a resident shall be allocated to this State” for income tax purposes. [2] Through such provisions, the IDOL apparently intends to provide more detail for determining whether an employee is deemed employed within Illinois and, therefore, counts for purposes of the IEPA’s certification requirements.
Regulations under the IITA regarding “Allocations of Compensation Paid to Nonresidents” (86 Ill. Admin. Code § 100.3120) further define and provide fairly detailed hypothetical examples of concepts set forth in the above IITA provisions, including “Base of Operations,” “Place of Direction or Control,” and “When Residence Is Important.” Notably, these regulations (as opposed to the foregoing IITA provisions) are not expressly referenced or incorporated into the IEPA. It remains to be seen whether they may be deemed instructive by courts or the IDOL in interpreting these IEPA certification provisions.
Require Enrollment With IDOL for Certification Deadline Notification
The final regulations adopt the IDOL’s previously informal contact information survey as a required “enrollment” form. Businesses that become subject to the equal pay certification requirements of the IEPA “shall” enroll with the IDOL via the department’s web-based submission portal. Further, a business that becomes authorized to transact business in the State of Illinois on or after March 24, 2021, shall enroll by January 1 of the calendar year immediately following the year in which the business becomes so authorized.
Formalized Notice Requirements for Assigning Certification Deadlines
The final regulations provide that the IDOL will “randomly assign” certification deadlines, and once it does so businesses will get “at least 120 calendar days’ notice” of that deadline (notably, this is shorter than the period provided in the IDOL’s FAQs, which as of this publication date provide that “IDOL will then provide you with an EPRC application due date at least 180 calendar days before your application will be due” (emphasis added)). As noted, a covered employer will then be required to recertify, and will receive notice of the recertification due date “at least 180 calendar days” in advance of that deadline.
Certifying Representative
As noted above, the IEPA requires that the Equal Pay Compliance Statement be signed by a corporate officer, legal counsel, or authorized agent of the employer. Like the initial proposed regulations, the final regulations clarify that an “[a]uthorized agent does not include any outside or third-party consultant or vendor who serves the business.”
Detail Format Requirements for Pay and Demographic Data in Certification Application
Employers must provide to the IDOL a list of all employees, along with “any other information required by the Department on the application form,” which currently includes gender, race, ethnicity, and pay data, in a text-searchable, sortable Microsoft Excel file or comma-separated values file format.
The regulations also allow a business to “provide any other information it believes is relevant to explain any pay disparities amongst its employees.”
The IDOL provides on its website an “Equal Pay Registration Certificate Template (XLS)” template for employers to use as a basis for this list.
Definition of Statutory ‘Compliance’ That Must Be Certified
As noted, the IEPA requires a covered business to certify “that the business is in compliance with [the IEPA] and other relevant laws, including but not limited to: Title VII of the Civil Rights Act of 1964, the Equal Pay Act of 1963, the Illinois Human Rights Act, and the Equal Wage Act.” The final regulations clarify that, for these purposes, “‘Compliance’ means that, as of the date of application or recertification, the business either: 1) has not had any final and non-appealable adverse judgment or final and non-appealable administrative ruling entered against it in the preceding two years under [any of the above specifically identified laws]; or 2) has corrected any final and non-appealable adverse judgment or final and non-appealable administrative ruling entered against it under [any such specifically identified laws].”
‘Wages’ to Be Reported
As noted, the IEPA requires in part that covered businesses report the total wages paid to each employee during the last calendar year (preceding the certification year), rounded to the nearest hundred dollars. The final regulations add a clarifying provision: “For the purposes of this report, wages shall be reported by either the mean hourly wage (for employees paid hourly wages) or annual mean wage (for salaried employees).”
The precise interpretation of this provision is an open question, but it may involve situations in which an employee has a pay change while in the same position in a given calendar year—in contrast to, for example, an IDOL FAQ addressing the reporting of promotions:
18. If an employee started in their role prior to the EPRC reporting year, but was then promoted during the reporting year, would we list their hire date as the original date they started in their position?
How would we indicate their promotion to a new pay rate and job title?
If an employee is promoted once or multiple times in the course of their employment, you should list the start and end dates for their time in each position, with the corresponding job titles and pay rates.
Certification as to Certain ‘Bona Fide Occupational Qualifications’
As noted, the IEPA requires in part that covered businesses certify “that the business does not restrict employees of one sex to certain job classifications, and makes retention and promotion decisions without regard to sex.” The final regulations add a requirement: “Businesses with positions for which sex is a bona fide occupational qualification, as defined in 29 CFR 1604.2, must provide a list of such positions with a short explanation of why sex is a bona fide occupational qualification for those positions.”
Provide for Opportunity to Cure
The IEPA provides that a covered business “shall have the opportunity to cure any deficiencies in its application that led to the rejection, and re-submit the revised application to the Department within 30 calendar days of receiving a rejection.” Consistent with the proposed regulations, the final regulations elaborate that if a business discovers it provided “incorrect or incomplete information” in connection with its application for certification, it shall submit a revised application to the IDOL along with a letter identifying the amended information, and “shall not be subject to penalties,” provided the incorrect information was provided in good faith and without knowledge of the inaccuracies.
Clarify Certain Revocation and Suspension Grounds
The IEPA provides that the IDOL may suspend or revoke a previously issued equal pay registration certificate when, among other things, the business fails to make a “good faith effort” to comply with, or has “multiple violations” of, the IEPA’s certification requirements or certain enumerated statutes.
The final regulations add a clarification that “multiple violations” means “two or more violations” and, for purposes of this provision, “a violation means any final and non-appealable adverse judgment or final and non-appealable administrative ruling entered against the business since the most recent submission to the Department under this Act.”
The final regulations also preserve the initial proposed regulations’ clarification that “‘good faith effort’ means demonstrable efforts by the business to promote pay equity and combat employment discrimination, including but not limited to, internal compensation reviews, staff training, adoption of equal opportunity policies, and evidence that such policies were enforced through evaluation, investigation, and personnel action.”
Outline Appeal Procedures
Under the final regulations, if the IDOL rejects a covered employer’s application for an equal pay registration certificate, the employer wishing to appeal must do so to the IDOL in writing within 14 calendar days of receipt of the rejection. The IDOL will notify the employer of its decision within 30 calendar days after receipt of the appeal.
If the IDOL denies the appeal, it will provide a notice with the reason(s) for the denial and issue a new date by which the employer must submit an amended certification application. An employer that appeals and is denied is in violation of the IEPA until it cures all identified deficiencies.
Empower IDOL to Investigate Equal Pay Violations
The adopted final regulations require the IDOL to conduct an investigation before it suspends or revokes a business’s equal pay registration certificate, and provide the IDOL with various investigative powers, including to conduct audits, interview workers, take depositions, and subpoena witness testimony and production of certain documents, including personnel files, compensation information, and other records.
Under the final regulations, the IDOL must provide a business with notice of the investigation within 30 days of starting the investigation. This notice must state the reason for the investigation and identify the data in the business’s application that warrants investigation. A business must submit a response to the IDOL within 30 business days after receipt of such notice.
Empower Employees of Covered Businesses to Request Pay Data
Under the IEPA, an employee may submit a request to the IDOL for anonymized pay data regarding their own job classification and title. The final regulations preserve the initial proposed regulations’ provisions that, on such a request, the IDOL shall provide up to 10 years of such data for employees working in the same county as the requesting employee. There is no mechanism for notifying an employer that such a request has been made.
The IDOL revised its FAQs to note that, beginning in 2023, it “will require employers to submit the total hours worked by each employee during the payroll year.” This is a significant development, and it is not limited to hourly employees or certain classifications of employees (e.g., nonexempt employees).
However, the IDOL did not provide for this requirement in the adopted final regulations and has not yet issued any other guidance on the topic. The regulations do include, among the information required for an application for certification, a catchall for “any other information required by” the IDOL.
As noted in endnote 1, a recently added FAQ on the IDOL website states: “The Department is no longer requiring businesses to file their most recent EEO-1. We have administratively suspended that requirement for the time being but may request copies of EEO-1 filings in the course of an investigation.”
The final regulations also add some specificity regarding procedures for IDOL investigations under the IEPA that do not involve the act’s equal pay certification requirements, namely:
Within 30 business days after receipt of the complaint, the Department shall provide the respondent with a written notice of investigation stating the substance of the alleged violation and giving the respondent an opportunity to respond to the allegation and present any information the respondent wishes the Department to consider in its investigation of the alleged violation. The respondent must submit such response to the Department within 30 business days after receipt of the notice of investigation.
The final regulations further clarify that the IDOL will not investigate more than five years prior to the complaint filing date.
(i) Determine whether the company has registered accurate and current contact information with the IDOL to ensure communications are received
(ii) Determine whether the company has received a deadline to submit its equal pay registration certificate application
(iii) Continue taking steps to prepare for the application, including assessing pay equity issues as required by the law, particularly given that the IDOL intends to provide 120 days’ notice of the submission deadline
(iv) Consider consulting with legal counsel regarding the applicability of and the company’s compliance with these requirements
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following:
[2] The IEPA language that is borrowed from the IITA draws from IITA provisions applicable to “tax years ending prior to December 31, 2020.” The IEPA contains no such temporal restriction, however.