On July 31, 2019, Illinois Governor J.B. Pritzker signed into law HB834, which amends the Illinois Equal Pay Act by restricting employers’ ability to inqure about or use pay history in hiring and compensation decisions. Illinois becomes the eleventh state to enact legislation prohibiting salary history inquiries by private employers. Other states like Michigan and Wisconsin, however, have gone the opposite way passing legislation prohibiting local governments from enacting salary history inquiry ban laws. The No Salary History law, will take effect by October 1, 2019, giving employers just 60 days to adjust their policies and hiring procedures to ensure compliance with the new law.
Since 2003, the Equal Pay Act has prohibited Illinois employers from paying employees who perform “substantially similar work” different pay rates based on their sex or race, though employers are free to pay employees of different sexes or races differently provided that the pay differential is based on factors other than sex or race.
Under the amendments, employers may no longer screen job applicants by requiring that their current or past salary “satisfy minimum or maximum criteria; or to request or require such wage or salary history as a condition of being considered for employment.”
The law also prohibits employers from requesting applicants, or their current or past employers, to disclose wage or salary history. Employers may still request that an applicant define his or her salary expectations. And an applicant is free to volunteer his or her wage or salary history, provided, however, that if an applicant does volunteer such information, an employer may not rely on that information in making hiring or compensation decisions. The law does make exceptions for applicants whose wage or salary history is a matter of public record and for current employees seeking a different position within the same company.
Additionally, the law prohibits employers from requiring employees to “sign a contract or waiver that would prohibit the employee from disclosing or discussing information about the employee’s wages, salary, benefits or other compensation.” Employers are still permitted to enact policies prohibiting employees whose jobs involve access to others’ pay information, such as human resources employees, from disclosing compensation information about a particular employee without that employee’s written consent.
The new law will likely increase pay discrimination litigation, particularly in the near future when courts have not yet determined how the law will be applied. Employers who do not devote conscious effort to comply with the new law may find themselves subject to substantial liability as the new law substantially increases liability for Equal Pay Act violations. Under the old law, employers found guilty of pay discrimination could be liable for the amount of any pay differential, plus interest and attorneys’ fees. Under the new law, employers may also be found liable for “special damages” (up to $10,000.00) and punitive damages, along with any additional compensatory “needed to make the employee whole.”
What Steps Should Employers Take to Prepare for the New Law?
First and foremost, employers must adjust how they approach salary and compensation in the hiring process. It is no longer acceptable to ask applicants in the interview process how much they currently make in order to gauge what a competitive starting salary would be. Employers should instead ask applicants “what will it take” to attract them from their current jobs—focusing on compensation expectations instead of history. While employers remain free to negotiate with applicants concerning starting salary, compensation decisions must be based on objective, non-discriminatory bases such as work experience, education, and demonstrable skills and qualifications. Job applications and other application materials should be revised to strike salary history-related questions.
Additionally, employers should review their current compensation policies and employee handbooks with an experienced employment and wage and hour attorney. Policies and handbooks may need to be amended to comply with the law’s prohibitions on restricting employees’ right to discuss “wages, salary, benefits, or other compensation” with one another. Finally, if an employer uses a template separation or releases agreements that contain confidentiality provisions, it should consider expressly carving out any limitation on the employee’s disclosure of information about his or her compensation.
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