Proposed Rules for Illinois Equal Pay Act Create More Obligations and Confusion for Employers | Quarles & Brady LLP
As noted in our previous alert, the Illinois Legislature amended the state’s Equal Pay Act to require companies with more than 100 employees to obtain an Equal Pay Registration Certificate. Compensation (“Certificate of Registration”) from the Illinois Department of Labor by March 24, 2024. A Certificate of Registration requires companies to submit certification of compliance, an EE0-1 report, and data on employee compensation. Among other elements of the compliance certification, an authorized company representative must certify that the average compensation of female and minority employees is not consistently lower than the average compensation of male and non-minority employees.
However, the changes left several important questions unanswered, including how the Department would determine whether a company had 100 employees, which employees a company should cover in its compensation data, and how companies should assess “average compensation” for the purposes of the certification.
The Department recently released proposed rules to attempt to answer some of these questions. The most notable proposals, which only delve into many of these questions, are listed below:
- Expand the range of employers required to obtain a certificate of registration. One of the main areas of ambiguity concerns the counting of employees outside of Illinois. The proposed rules reflect the Department’s view that a business must count an out-of-state employee and include the employee in compensation data if: (a) the out-of-state employee performs services to a company with a “base of operations” in Illinois; or (b) the out-of-state employee is “directed” or “controlled” by a company located in Illinois. The terms “base of operations”, “directed” and “controlled” remain undefined in the proposed rules. A review of the Department’s Frequently Asked Questions (“FAQs”) suggests that “base of operations” means a location in Illinois where the employee is officially assigned. In other words, if the employee is officially assigned to an Illinois location in the workforce records, the employee is likely covered.
Even a remote employee who is not directed by, controlled by, or assigned to a location in Illinois may still be covered if they physically reside in Illinois. Given the ambiguity of the rules, the company will want to seek advice on whether to include an employee who fits this profile.
The terms “directed” or “controlled” are even more vague in the proposed rules and are not addressed in the FAQ at all. As these terms remain unclear and likely undefined for the foreseeable future, companies should take note of any out-of-state employee who reports (directly or indirectly) to a supervisor, work group or a management team located in Illinois. Businesses should also consider any out-of-state employees with responsibilities, tasks, duties, or projects related to any aspect of the business operating in Illinois, as the Department may determine that such persons are “directed” or “controlled” by a part of the business in Illinois. It is especially advisable to examine these issues closely with out-of-state employees if the company is on the verge of otherwise reaching 100 employees in Illinois.
- Require businesses to acknowledge in writing their registration certificate obligation. The proposed rules also require covered businesses to submit a “registration form” acknowledging their responsibility to comply with the registration certificate obligations. Interestingly, the Department has proposed a deadline for submitting the registration form that occurs in the past, requiring it by March 23, 2022 for all covered businesses authorized in Illinois as of March 23, 2021. Not only this would immediately put many businesses out of compliance, but it would also require businesses to admit in writing that they are subject to the certificate requirement.
- Complicate the analysis of “average earnings”. The Department proposes to define “average earnings” as “the average salary for a specific occupation as defined by the Bureau of Labor Statistics State Occupational Employment and Wage Estimates.” The syntax and wording of this definition are also ambiguous. What the Department could mean is that companies will need to analyze their data by occupation and compare average salaries for each occupation, referring to the US Bureau of Labor Statistics for the types of occupations to consider. This Ministry approach should not disappear. Whether or not the Department adopts the proposed rules in their current form, affected companies should begin reviewing their compensation data by occupation to identify areas requiring attention. Taking quick action can be particularly helpful because the Department views proactive efforts by a company to address compensation issues favorably.
Given the issues presented by these proposed rules, companies may consider submitting comments to the Department. The notice and comment period remains open until July 4, 2022, and interested parties may submit comments to Anna Koeppel at the Illinois Department of Labor, 524 S. 2nd St., Suite 400, Springfield, Illinois 62701 or [email protected] govt.