Law and the Workplace

Substantial Changes Ahead for Illinois Employers in 2020 Relating to Sexual Harassment Training, Mandatory Arbitration Agreements, and More

Seal of the State of Illinois

On August 9, 2019, Governor Pritzker signed into law Public Act 101-0221 (the “Act”), which enhances protections against workplace sexual harassment and discrimination.  The Act creates new laws and amends several existing ones, including the Illinois Human Rights Act (“IHRA”), as summarized below:

NEW LAWS

The Workplace Transparency Act (“WTA”).  The Workplace Transparency Act will apply to all contracts entered into, modified or extended on or after January 1, 2020, and limits the use of confidentiality provisions in employment agreements and arbitration of sexual harassment and other Title VII or IHRA violations.  (Our post on the WTA can be accessed here.)

The Hotel and Casino Employee Safety Act.  Beginning on July 1, 2020, certain employers in the hospitality and casino industries will be required to:

  • Equip employees with personal safety and notification devices that may be used to summon help if they are the victim of or are witnessing sexual harassment or a crime.
  • Expressly inform each of their employees about the protections against sexual harassment and discrimination as found in the IHRA and Title VII. Employers will now be required to include specific language in written anti-sexual harassment policies instructing employees to leave the work area immediately if they perceive danger.
  • Take measures to separate employees from offending guests and accommodate employees who seek legal protection against offending guests. Employers will now be required to offer employees temporary work assignments to accommodate them if they complain about guests who have engaged in sexual harassment and provide employees with paid time off to make police reports about offending guests and to attend legal proceedings regarding any such complaints.

UPDATES TO THE IHRA

Beginning on January 1, 2020, the IHRA will now:

  • Expressly apply to working environments beyond the physical location at which employees perform their assigned duties, signifying that sexual harassment of remote workers taking place exclusively online and/or outside the workplace is prohibited by the Act;
  • Protect against discrimination or harassment on the basis of an individual’s “perceived” status protected by the IHRA;
  • Protect non-employees performing work for an employer (e., contractors and consultants in an employer’s workplace); and
  • Require all Illinois employers to establish a training program consistent with a forthcoming state sexual harassment program, and issue training at least once per year to all employees.

In addition, beginning July 1, 2020, Illinois employers will be required to disclose annually the number of adverse judgments or administrative rulings that have been entered against the employer related to sexual harassment or certain types of discrimination.  If the Illinois Department of Human Rights investigates a civil rights charge against an employer, the employer may be required to disclose the total number of settlements related to sexual harassment or discrimination.

IMPLICATIONS

Companies with Illinois-based operations should review and update employee handbooks, trainings, arbitration agreements, employment agreements with confidentiality provisions and any severance and/or separation agreements to ensure they are in compliance with the Act.

Illinois Enacts Workplace Transparency Act

On August 9, 2019, Illinois Governor Pritzker signed the Workplace Transparency Act (the “Act”) into law.  The Act will apply to all contracts, agreements, clauses, or waivers entered into, modified, or extended on or after January 1, 2020.  Here are the key features with respect to arbitration agreements, employment agreements and separation agreements that Illinois employers should be aware of:

  • The Act applies to contracts entered into with employees and non-employees (defined to include individuals who are directly performing services for the employer pursuant to a contract, including contractors and consultants).
  • Employers may no longer unilaterally require arbitration of any claim arising under any law enforced by the Equal Employment Opportunity Commission (“EEOC”) or the Illinois Department of Human Rights (“IDHR”).  This includes claims under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, Americans with Disabilities Act, the Equal Pay Act and the Illinois Human Rights Act (collectively, “EEO Laws”).  Any unilaterally required arbitration clause pertaining to EEO laws will be deemed void to the extent it denies substantive or procedural rights or remedies.  (Although this provision potentially conflicts with and thus may be preempted by the Federal Arbitration Act, no so such challenge has yet to be raised to the courts.)
  • Employers cannot unilaterally condition employment or continued employment on an agreement that has the purpose or effect of preventing individuals from making truthful statements or disclosures about violations of EEO laws (e.g., a confidentiality clause that prohibits reporting of EEO violations).
  • However, agreements that reflect mutual conditions of employment (e.g., that are negotiated between an employer and employee in good faith for consideration in order to obtain or retain employment) are permissible, but only where they are: (A)  in writing; (B) demonstrate actual, knowing, and bargained-for consideration from both parties; and (C) expressly acknowledge the right of the employee or prospective employee to (i) report good-faith allegations of violations of EEO laws; (ii) report good-faith allegations of criminal conduct; (iii) participate in proceedings before EEOC and/or state or federal agency enforcing EEO laws; and (iv) make truthful statements required by law.
  • Employee termination and/or separation agreements that include confidentiality covenants relating to EEO violations are permissible only where:
    • Confidentiality is the preference of the employee and is mutually beneficial to both parties;
    • The employer notifies the employee in writing of his or her right to attorney review of the agreement before its execution;
    • There is valid and bargained-for consideration for the exchange of confidentiality;
    • The agreement does not waive claims of EEO violations that accrue after the date the agreement is executed;
    • The employee has 21 days to consider the agreement before execution; and
    • Unless knowingly and voluntarily waived by the employee, the employee has 7 calendar days following the execution of the agreement to revoke it.
  • Employees may be entitled to attorneys’ fees incurred for successful challenges to contracts that violate the Act.

Illinois employers, along with organizations that utilize contractors or consultants in Illinois, should take immediate steps to review all relevant policies and contracts—including employee handbook provisions, service and/or employment contracts, arbitration agreements and separation agreements—to ensure they are in compliance with the Act.

New York State Enacts Law Prohibiting Religious Discrimination Based on Appearance

On the heels of enacting a law to prohibit hairstyle discrimination, New York Governor Andrew Cuomo has signed into law a bill that amends the New York State Human Rights Law (NYSHRL) to expressly prohibit employment discrimination based on attire, clothing, or facial hair worn as a form of religious observance.

Specifically, the new law makes it an unlawful discriminatory practice for an employer (or an employee or agent thereof) to impose upon a person as a condition of obtaining or retaining employment – including opportunities for promotion, advancement or transfers – any terms or conditions that would require such person to violate or forego a sincerely held practice of their religion.  Such practices could include, for example, wearing “any attire, clothing, or [having] facial hair in accordance with the requirements of [the employee’s] religion.”  Employers may, however, still take advantage of the undue hardship defense if they are able to demonstrate that they have engaged in a bona fide discussion with the employee or applicant and are unable to reasonably accommodate the employee’s or applicant’s sincerely held religious observance without imposing an undue hardship on the employer’s business.

The new law takes effect sixty days after it was enacted (i.e., on October 8, 2019).  Employers in New York should review their current dress code and grooming policies to ensure compliance with these new requirements.

New York State Significantly Expands Workplace Anti-Discrimination Protections

On August 12, 2019, Governor Andrew Cuomo signed into law significant expansions to workplace anti-discrimination protections in New York State.

As we previously reported in detail, the new legislation includes numerous measures regarding discrimination and harassment in all forms (not just sexual harassment) in the workplace.  The signing of the bill triggers the countdown to the effective dates of the following provisions:

Effective Immediately

  • New York employers will be required to provide employees, both at the time of hire and at every annual sexual harassment prevention training, with a notice containing the employer’s sexual harassment prevention policy and “the information presented at the employer’s training program.”  This notice must be provided in writing in English and in the language identified by an employee as their primary language, if different.  The State will be preparing template non-English versions of the its model anti-harassment policy and training program that employers may use to satisfy this requirement.

Effective October 11, 2019

  • A complainant will no longer need to show that alleged sexual or other workplace harassment is “severe or pervasive” in order to succeed on their claim under the New York State Human Rights Law (“NYSHRL”), but rather need only show that they were subjected to “inferior terms, conditions or privileges of employment because of the individual’s membership in one or more of [the] protected categories [in New York State].”  However, it will be an affirmative defense for an employer to show that the conduct does not rise above the level of “petty slights or trivial inconveniences.”
  • The Faragher-Ellerth defense will no longer apply to discrimination claims under the NYSHRL.  This affirmative defense applies where an employee unreasonably fails to take advantage of an employer’s internal complaint mechanisms with regard to the claims at issue.  While the defense would still be available in response to federal discrimination claims, employers will not be able to raise the same defense to NYSHRL claims.
  • The new law will extend protections against discrimination on the basis of any protected category under the NYSHRL (not just sexual harassment, as is presently the case) to certain “non-employees” including contractors, subcontractors, vendors, consultants, or other persons providing services pursuant to a contract.
  • Employers will be prohibited from including nondisclosure provisions in any agreement or other resolution of a claim involving any allegations of unlawful discrimination, unless it is the preference of the complainant to do so.  In other words, the same limitations on nondisclosure provisions that presently apply to sexual harassment claims will now be extended to claims of discrimination on the basis of any protected characteristic.  Similar to the existing sexual harassment nondisclosure requirements, a complainant will need to be provided with 21 days to consider the nondisclosure provision and, if after 21 days the provision is the complainant’s preference, it must be memorialized in an agreement signed by all parties, after which the complainant will have seven days to revoke their agreement.
  • The existing prohibition on mandatory pre-suit arbitration of sexual harassment claims will be extended to any claims of unlawful discrimination.
    • However, as is the case with the current prohibition on mandatory arbitration of sexual harassment claims, the expanded prohibition applies only to the extent it is not inconsistent with federal law.  Recently, the Southern District of New York held in Latif v. Morgan Stanley Co. (S.D.N.Y. June 26, 2019), that New York’s prohibition on mandatory arbitration of sexual harassment claims is preempted by the Federal Arbitration Act in situations where both laws apply.  It seems likely that the Latif analysis would similarly apply to this latest attempt to restrict mandatory arbitration.
  • The new law will permit the award of uncapped punitive damages as well as reasonable attorney’s fees in cases of employment discrimination under the NYSHRL.  Currently, punitive damages and attorney’s fees are only available in housing discrimination cases.

Effective January 1, 2020

  • Any provision in a contract or other agreement entered into on or after January 1, 2020 that prevents the disclosure of information related to any future claim of discrimination on the basis of any protected characteristic will be unenforceable, unless the provision notifies the employee or applicant that it does not prohibit them from speaking with law enforcement, the EEOC, the New York  State Division of Human Rights, a local commission on human rights, or an attorney retained by the employee or applicant.

Effective February 8, 2020

  • The definition of a covered employer under the NYSHRL will be expanded to include all employers within the state, regardless of size.  Presently, the law only applies to employers with four or more employees, except with regard to protections against sexual harassment, which applied to employers of all sizes.

Effective August 12, 2020

  • Individuals will have three years to report claims of sexual harassment to the NY State Division of Human Rights, rather than the current one year limitation on reporting.

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We will continue to report on any further developments with regard to these noteworthy new provisions.

New Guidance on EEO-1 Component 2 Data Submissions For Companies Involved in Corporate Transactions

The Equal Employment Opportunity Commission (EEOC) has released additional guidance regarding the new EEO-1 Component 2 data reporting requirements for employers who were involved in mergers, acquisitions and spinoffs in 2017 and 2018. As we previously reported, employers must report their Component 2 pay and hours worked data for calendar years 2017 and 2018 by September 30, 2019.

In its guidance, EEOC advises, among other things, that acquiring companies are responsible for submitting Component 2 data of their acquired entity – whether the transaction occurred before or after the acquiring company’s workforce snapshot period. Similarly, where two companies merge to form a new entity, the new entity must report its Component 2 data, regardless of whether the merger occurred before or after the workforce snapshot period. Where a purchasing or newly formed company does not have access to a former entity’s Component 2 data, they should note that in the comments box on the certification page in the EEO-1 online portal. For acquisitions closing in 2018, an acquiring company would not be required to report the 2017 Component 2 data of a purchased company, if the purchased company would not have been obligated to report its own 2017 Component 2 data (i.e., if it had less than 100 employees in 2017).

With respect to spinoffs occurring in 2018, newly created subsidiaries are not responsible for reporting their 2017 Component 2 data. The former parent company, however, would be responsible for filing the 2017 Component 2 data for the employees of the spun off company. Parent companies that sold a part of their business in 2018 are not required to file the 2017 or 2018 Component 2 Data for the sold entity – the purchasing company has that responsibility.

The EEOC has also provided guidance for Professional Employer Organizations (PEOs). A PEO is not responsible for filing Component 2 data of entities that are former clients at the time of filing. When an agreement between a PEO and a client company does not cover 100% of the client’s workforce, the client company, not the PEO, must submit the Component 2 data.

Employers that have undergone mergers, acquisitions or spinoffs in 2017 and 2018 should consult the FAQs to determine their reporting requirements. We will continue to monitor and provide updates as they become available.

Illinois Bans Salary History Inquiries

On July 31, 2019, Illinois Governor J.B. Pritzker signed into law House Bill 834 (the “Bill”), which amends the Illinois Equal Pay Act of 2003 (“IEPA”) to prohibit employers from inquiring into a job applicant’s salary history.  The law becomes effective on September 29, 2019.

Prohibition on Salary History Inquiries

Illinois’s new ban on salary history inquiries will prohibit employers from screening job applicants based on their current or prior salary and from requesting or requiring that applicants disclose information about their salary history as a condition of being interviewed, considered for employment or offered employment. Employers also will be prohibited from soliciting salary history information from an applicant’s former employer.  However, this subsection does not apply if the applicant’s salary history is a matter of public record or if the applicant is one of the employer’s current employees.

The amendment also prohibits employers from factoring salary history information into compensation or hiring decisions even if an applicant provides the information voluntarily without prompting.

Employers who violate these new provisions can be liable for a combination of (1) up to $10,000 in special damages; (2) compensatory damages, to the extent they exceed an award of special damages; and (3) reimbursement of the plaintiff’s costs and attorneys’ fees.

Ban on Pay Secrecy Agreements

The Bill also amends the IEPA to prohibit employers from requiring employees to refrain from disclosing information about their compensation and benefits.  Employers, however, may still prohibit human resources employees from disclosing the compensation information of other employees without their prior written consent.

Amendment to Employer Defenses

The IEPA requires employers to compensate employees equally for “substantially similar work,” regardless of an employee’s race[1] or sex.  Under the IEPA, an employer will not be held liable if an alleged disparity in pay is due to, among other things, a differential based on any other factor than: (i) sex or race or (ii) a factor that would constitute unlawful discrimination under the Illinois Human Rights Act.  However, this “catch-all” defense will now require employers to show that the pay differential “(A) is not based on or derived from a differential in compensation based on race or another protected characteristic; (B) is job-related with respect to the position and consistent with a business necessity; and (C) accounts for the differential.”

From “Equal” to “Substantially Similar”

Currently, the IEPA prohibits employers from paying employees of different sexes or races at different rates for “work on jobs the performance of which requires equal skill, effort, and responsibility.”  As amended, the IEPA now states that employers may not pay differently for “work on jobs the performance of which requires substantially similar skill, effort, and responsibility.”  This change codifies an approach taken by Illinois courts.

Implications

Before the IEPA amendments take effect on September 29, 2019, Illinois employers should:

  • Review hiring practices to ensure compliance with the ban on salary inquiries;
  • Provide training to employees tasked with interviewing and hiring responsibilities; and
  • Review compensation structures to determine the reasons for pay differentials.

 

[1] The text of the IEPA specifically limits “race” protections to African-American employees. 820 ILCS 112/10(a).

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