New Illinois Law Poised to Ban Salary History Inquiries

By Bill Pokorny and Brianne Dunn - Franczek P.C.

August 1, 2019

Among the bills awaiting signature by Illinois Governor J.B. Pritzker is an amendment to the Illinois Equal Pay Act of 2003 that would ban employers from asking job applicants for information about their wage, salary or benefits history. Governor Pritzker is expected to sign the bill, HB834. With this new law, Illinois joins at least 12 other states and multiple counties and municipalities in restricting employers’ ability to obtain or use applicants’ compensation history in the process of hiring and setting compensation.

New Restrictions on Requesting and Using Salary History
HB834 specifically prohibits employers from screening job applicants based on their current or prior wages or salary histories, including benefits or other compensation, by requiring that the wage or salary history of an applicant satisfy minimum or maximum criteria. The bill also bans employers from requesting or requiring applicants to disclose wage or salary history as a condition of employment, or from requesting such information from any current or former employer. The bill provides exceptions where wage or salary history is a matter of public record under FOIA or other laws, or the applicant is a current employee.

The bill expressly provides that employers do not violate the new restrictions by merely sharing information with applicants about the compensation and benefits associated with a position or discussing applicants’ expectations regarding compensation and benefits. The bill also provides that an employer does not violate the new law if an applicant voluntarily discloses compensation and benefits history information in the course of such discussions. However, if that happens, the employer is barred from relying upon that information as a factor in determining whether to make an offer of employment or compensation, or in determining future wages, salary, benefits, or other compensation.

Expanded Claims Under the Equal Pay Act
In addition to restricting use of salary history information, HB834 also makes it easier for employees to bring and win claims under the Equal Pay Act. Currently, the Act prohibits employers from paying an employee at a lower rate of pay as compared to another employee of the opposite sex who performs work requiring “equal skill, effort, and responsibility, and which are performed under similar working conditions.” The Act provides the same protection for African-American employees as compared to non-African-American employees. The law allows employers to justify pay differentials when they are due to a seniority system, a merit system, a system that measures earnings by quantity or quality of production, or “a differential based on any factor other than” race, sex, or other unlawful discrimination.

HB834 amends the Act’s protections in two ways. First, instead of having to demonstrate that another employee performs work requiring “equal” skill, effort, and responsibility, plaintiffs will now only have to show that the levels of skill, effort, and responsibility are “substantially similar.” Second, the law limits employers’ ability to justify pay disparities based upon “any factor other than” unlawful discrimination by requiring employers to show that the factor relied upon “is not based on or derived from a differential in compensation based on sex or another protected characteristic,” that it is “job-related with respect to the position and consistent with business necessity,” and that the factor “accounts for the differential.”

Ban on Agreements Restricting Employees From Disclosing Compensation
Under the existing law, employers are barred from taking action against any employee for “inquiring about, disclosing, comparing or otherwise discussing the employee’s wages or the wages of any other employee …” HB834 expands upon these protections by specifically prohibiting employers from requiring an employee to “sign an contract or waiver that would prohibit the employee from disclosing or discussing information about the employee’s wages, salary, benefits, or other compensation.” However, the amendment now expressly allows employers to prohibit HR employees, supervisors, and other employees whose job responsibilities afford them access to other employees’ compensation information from disclosing that information “without prior written consent from the employee whose information is sought or requested.”

Increased Liability for Violations
HB834 also significantly expands employers’ potential liability for Equal Pay Act violations. Under current law, employees who prevail on a claim under the Act can recover the amount of any pay differential, plus interest and attorneys’ fees and costs. Employers are also subject to civil penalties of up to $5,000 per affected employee. HB834 amends the Act to allow employees to recover compensatory damages if the plaintiff demonstrates that the employer acted “with malice or reckless indifference,” and punitive damages. Employers who violate the new restrictions on salary history inquiries can also be held liable for “special damages” of up to $10,000 and any additional compensatory damages needed to make the plaintiff whole. The amendment also allows courts to award injunctive relief. The statute of limitations under the amended law will remain 5 years from the date of each underpayment.

What Employers Should Do
The new provisions of HB834 will take effect 60 days after the Governor signs the bill. The Equal Pay Act applies to all Illinois employers, regardless of size, including governmental bodies. Employers should prepare to comply with the new law as soon as possible. Steps to consider include the following:

•    Employers must change their recruiting and hiring practices to eliminate inquiries regarding compensation and benefit history, and should not rely on candidates’ compensation or benefit history when selecting candidates or determining compensation or benefits.
•    When recruiting, employers should shift compensation discussions with candidates away from the candidates’ salary history to focus on candidates’ expectations and the salary range that the employer has identified for the position.
•    Employers should train all personnel involved in the recruiting and hiring process on these new requirements.
•    Employers should review their existing compensation structures to identify pay differentials between employees who perform similar work and assess whether those differentials can be justified under the amended law. Differentials based solely upon prior compensation history may now be difficult for employers to defend. Consider engaging legal counsel to conduct this review, as the legal issues can be complex and an assessment done without the assistance of counsel will not be privileged.
•    While employers should consider addressing any pay disparities that may be problematic under the new law, they should be cautious in how they do so. The Act prohibits employers from reducing the pay of any employee to comply with the Act. While increasing compensation is less problematic, that too can create employee relations and legal issues if not handled with care. Proceed with caution, and consult with legal counsel.
•    Employers should review their confidentiality policies and agreements to ensure that they do not run afoul of the Act’s new restrictions on provisions limiting disclosure of compensation information.