On May 29, 2019, the Illinois General Assembly passed House Bill 834. The bill amends the Equal Pay Act of 2003 by restricting employers from inquiring into an applicant’s pay history, among other sweeping changes. The restriction is intended to narrow the wage gap by preventing employers from perpetuating historic pay disparities in the market.
On June 6, 2019, House Bill 834 was sent to Governor Pritzker. He is expected to approve the legislation, which will become effective 60 days after it is signed into law. Once in effect, Illinois will be the eleventh state to prohibit private employers from inquiring into or relying on an applicant’s past or current salary when setting pay. Other states have passed similar prohibitions on state agencies, while states like Michigan and Wisconsin have taken the opposite approach by prohibiting local governments from enacting laws that ban salary history inquiries.
The Equal Pay Act of 2003
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 because they are African-American, subject to limited exceptions, including that the wage differential was based on a factor “other than sex” or “other than race.”
House Bill 834
House Bill 834 amends the Equal Pay Act of 2003 to prohibit employers from: (1) screening applicants based on their wage or salary history; (2) requesting applicants disclose their wage or salary history; or (3) seeking an applicant’s wage or salary history from a current or former employer. There are exceptions in the bill for applicants whose wage or salary history is a matter of public record and for current employees who are seeking a different position with the same employer. Importantly, the amendments do not prohibit employers from discussing an applicant’s expectations with respect to wage or salary, or negotiating salary based on the applicant’s skills, qualifications or experience. Further, the amendments allow employers to provide information about the compensation and benefits being offered in relation to a position.
The bill also prohibits employers from requiring employees to sign contracts or waivers that restrict employees from talking about their salaries or the employer’s compensation policies and allows employers to enact policies prohibiting human resources employees from disclosing an employee’s compensation information without the employee’s written consent. Finally, the amendments clarify the standards for establishing equal pay violations by: (1) relaxing the standard for establishing whether employees of the opposite sex or different races are performing substantially similar work; and (2) clarifying that employees of the opposite sex or different races may be paid different rates based on a factor that is job-related, consistent with business necessity and accounts for the differential in pay.
Impact on Employers
House Bill 834 will shape how Illinois employers engage with applicants and set compensation. It is no longer appropriate for employers to ask applicants how much they make in their current (or any prior) job in order to offer a competitive starting salary. Instead, employers should focus on the applicant’s pay expectations by asking “what will it take” to attract the applicant away from their current employer. Employers remain free to negotiate with applicants concerning starting salary based on their work experience, education and demonstrated skills and qualifications. Inevitably, during negotiations, applicants may voluntarily disclose their current salary. Employers should redirect discussions away from salary history and back to the applicant’s compensation expectations.
If an employer is going to set different pay rates based on a factor other than sex or race, the employer should be confident that the factor justifies the differential. For example, it may be suspect to offer two applicants of different genders or races significantly different starting salaries solely because one had four years of experience while the other had three and a half. The difference in pay must be proportional to the differential other than sex or race – in this example, years of experience.
Finally, employers should consider expressly carving out of separation agreements and releases any limitation on the employee’s disclosure of information about his or her compensation.
Taft’s Employment and Labor Relations team is experienced in designing compensation and hiring policies that comply with local, state and federal law. If you have any questions as to how the changes in the law will affect you, please contact us.