Governor Pritzker Signs The Workplace Transparency Act Into Law,
Ushering in Change for Illinois Employers

Governor Pritzker has been busily signing dozens of new laws over the last few months. On August 9, 2019, the landscape for Illinois employers was significantly changed when he signed the Workplace Transparency Act ("WTA") into law, imposing a slew of new requirements and restrictions on employers operating in Illinois. The WTA, which will become effective January 1, 2020, is aimed at preventing harassment and discrimination in the #MeToo era.  The WTA has significant implications for Illinois employers, particularly with respect to:

• Restricting language commonly found in employment, separation and settlement agreements;

• Limiting the permissible scope of arbitration agreements;

• Expanding permissible claims under the Illinois Human Rights Act ("IHRA");

• Requiring mandatory, annual disclosures to the Illinois Department of Human Rights ("IDHR") regarding adverse judgments; and

• Requiring mandatory, annual sexual harassment prevention training.

With less than six months to comply, Illinois employers must quickly familiarize themselves with the WTA's new requirements and restrictions. Information about the key provisions of the WTA is set forth in more detail below.

Employment, Separation and Settlement Agreements

Under the WTA, employer-employee agreements entered into, modified or extended after January 1, 2020, must exclude certain previously-permissible provisions and must meet certain requirements in order to be valid. In particular, Illinois employers must be aware of the following:

Non-Disclosure/Non-Disparagement in Employment Agreements

Under the WTA, employment agreements cannot as a condition of employment, promotion, compensation, change in employment status or contractual relationship, require nondisclosure or non-disparagement clauses that cover harassment or discrimination. Subject to certain exceptions, the WTA further restricts Illinois employers from requiring employees, as a condition of employment, to agree to refrain from making "truthful statements or disclosures" about unlawful employment practices.

Employers may, however, by an agreement that is a mutual condition of employment, restrict the rights of employees to report unlawful employment practices, but only if the following conditions are met:

• The agreement is in writing;

• The agreement demonstrates "actual, knowing and bargained-for consideration from both parties";

• The agreement acknowledges that:

  • Employees have the right to report any "good faith" allegation of unlawful employment practices or criminal conduct to a government agency;

  • Employees have the right to participate in any government proceeding;

  • Employees have the right to make truthful statements and disclosures required by law, regulation or legal process; and

  • Employees have the right to receive confidential legal advice.

It remains to be seen how courts will determine the standard for "actual, knowing, and bargained-for consideration from both parties." It should not be assumed, however, that boilerplate acknowledgement language will meet the demands of the WTA's requirements.

Non-Disclosure/Non-Disparagement Provisions in Separation and Settlement Agreements

The WTA also restricts the ability of employers to demand confidentiality of alleged unlawful employment practices in the context of separation or settlement agreements. The WTA provides that such an agreement may include such confidentiality clauses only if:

• "Confidentiality is the documented preference of the employee;"

• Confidentiality "is mutually beneficial to both parties;" and

• There is "valid, bargained for consideration in exchange for confidentiality."

Until standards are established, employers are likely to employ different approaches to address these requirements, which will undoubtedly complicate the negotiation of termination and settlement agreements, furthering the possibility for future litigation. Of course, an employee's ongoing confidentiality regarding alleged discrimination often is one of the major elements of consideration offered to induce an employer to make a settlement payment. Under the WTA, however, employers must either negotiate confidentiality terms separately from the consideration offered for a general release, or identify in the agreement the specific monetary payment that is being offered in exchange for an employee's confidentiality obligation.

The WTA further draws inspiration from the Older Workers Benefit Protection Act of 1990 (OWBPA), placing procedural requirements for consideration and revocation periods on employers wishing to negotiate a confidentiality provision. As with OWBPA, in order for a confidentiality provision to be enforceable, employers must give employees, regardless of age:

• 21 days to "consider the agreement before execution;

• 7 days following the execution of the settlement or termination agreement for revocation; and

• Notice of the employee's right to have an attorney review the agreement before it is signed.

Employee Arbitration Agreements

The WTA significantly changes the structure of individual arbitration agreements entered into, modified or extended after January 1, 2020. The earlier version of the WTA restricted the right of employers to require employees to arbitrate harassment or discrimination claims. Under the WTA as enacted, employers still may not impose as a unilateral condition of employment or continued employment that an employee or prospective employee "waive, arbitrate or otherwise diminish any existing or future claim, right or benefit related to an unlawful employment practice" to which they are entitled under state or federal law. Examples of such restrictions that may not be imposed unilaterally by employers, in addition to mandatory arbitration, are likely to include contractual provisions that shorten the statute of limitations, restrict the right to seek punitive damages, force an employee to pay fees or costs above what is required to pursue claims in court, or force an employee to resolve claims in an inconvenient location that would not be required of an employee pursuing the same claims in state or federal court. The WTA makes such provisions, if unilaterally imposed, "against public policy, void to the extent it denies an employee or prospective employee a substantive or procedural right or remedy related to alleged unlawful employment practices," and "severable from an otherwise valid and enforceable contract."

The WTA, however, would appear to allow an employer and employee to agree to, as a "mutual condition of employment or continued employment," provisions "that would otherwise be against public policy as a unilateral condition of employment or continued employment." That includes an agreement to arbitrate unlawful employment practices. These otherwise void provisions become valid only if they are mutual and meet all of the requirements described above for employment agreements. That is:

• The agreement is in writing;

• The agreement demonstrates "actual, knowing and bargained-for consideration from both parties";

• The agreement acknowledges that:

  • Employees have the right to report any "good faith" allegation of unlawful employment practices or criminal conduct to a government agency;

  • Employees have the right to participate in any government proceeding;

  • Employees have the right to make truthful statements and disclosures required by law, regulation or legal process; and

  • Employees have the right to receive confidential legal advice.

The failure of an arbitration clause or agreement to meet each of these required elements establishes a "rebuttable presumption that the agreement … is a unilateral condition of employment or continued employment" and, thus, void and unenforceable. So, while the enacted WTA leaves open the possibility of an employer and employee mutually agreeing to arbitrate unlawful employment practice claims, employers should brace for subsequent challenges to those provisions as having been unilaterally imposed and thus void. Unless authentically negotiated and properly drafted, arbitration provisions are likely to lead to expensive litigation over the provisions' enforceability.

Expansions of the Illinois Human Rights Act

The WTA amends the IHRA to widen the scope of its application in the following three significant ways:

Actual or Perceived Protected Status

Consistent with EEOC guidance and several recent federal court opinions interpreting Title VII, the WTA amends the IHRA to expand the definition of unlawful discrimination and harassment to mean "discrimination against a person because of his or her actual or perceived: race, color, religion, national origin, ancestry, age, sex, marital status, order of protection status, disability, military status, sexual orientation, pregnancy, or unfavorable discharge from military service" and "any unwelcome conduct" on the basis of the same.

The implication of these definitional changes to include both actual or perceived protected classes cannot be understated. By expanding the definition of actionable discrimination and harassment to more than one's own actual, immutable or protected characteristics, the WTA is likely to significantly increase the claims Illinois employers will be forced to litigate under Illinois law.

Non-Employee Claims

The WTA further broadens the IHRA by expanding its statutory harassment protections to certain non-employees that are directly performing services for an employer pursuant to a contract (most commonly, contractors/consultants). Employers will now be subject to claims by non-employee contractors or consultants alleging harassment by employees in the workplace. By opening the door to such liability, in some regards, the WTA detracts from the benefits of utilizing non-employee contractors or consultants.

Mandatory Disclosures to the Illinois Department of Human Rights

In addition to the above requirements which take effect January 1, 2020, beginning July 1, 2020, Illinois employers must meet new reporting requirements. By July 1, and by each July 1 thereafter, employers must disclose to the IDHR the following statistics for the previous calendar year:

• The total number of adverse judgements or administrative rulings against the employer under both federal and state law, including the total number of adverse judgments and administrative rulings as well as a breakdown of the number based on protected characteristics; and

• The equitable relief, if any, that was ordered against the employer in any adverse judgements or administrative rulings.

Moreover, if the IDHR is investigating a charge, it may request that the employer responding to the charge submit the total number of settlements it entered into during the prior five years (or less at the IDHR's discretion) that relate to any alleged act of sexual harassment or unlawful discrimination that either: (1) took place in the workplace or (2) involved the behavior of an employee or corporate executive, regardless of location. Employers must report the total number of settlements, in addition to a breakdown of the settlements based on protected characteristics. (An earlier version of the WTA mandated that employers disclose settlements without the IDHR first requesting that information. The WTA as enacted only requires this disclosure if requested by the IDHR during an investigation into a charge of discrimination.)

Failure to disclose this information could result in civil penalties up to $5,000 per offense. Notably, the information contained in an employer's disclosures are not subject to disclosure under the Freedom of Information Act.

Mandatory Annual Sexual Harassment Prevention Training

Beginning January 1, 2020, the WTA requires all Illinois employers to provide annual sexual harassment prevention training to all employees. Employers will be able to use an IDHR-created model sexual harassment prevention training program, or create their own training, provided it achieves the following:

• Explains and defines sexual harassment as stated in the IHRA;

• Provides examples of conduct that constitutes sexual harassment;

• Summarizes federal and state laws concerning sexual harassment and outlines remedies available to victims of sexual harassment; and

• Outlines the responsibilities of an employer to prevent sexual harassment in the workplace.

As with the mandatory disclosures, employers may be subject to civil penalties of up to $5,000 for failing to provide the appropriate annual sexual harassment prevention training to employees.

Proactive Steps for Illinois Employers

In order to prepare for the implementation of the WTA, Illinois employers should consider proactively taking the following actions:

• Reviewing standard employment, separation and settlement agreement templates and updating them to ensure compliance with restrictions regarding confidentiality, non-disclosure and non-disparagement;

• Reviewing individual arbitration agreements for appropriate scope and necessary revisions;

• Updating discrimination and harassment policies to reflect changes to the IHRA;

• Implementing policies and procedures for non-employees to report allegations of harassment;

• Maintaining a log of adverse judgments, administrative rulings and settlements and preparing a template for reporting the same to the IDHR; and

• Preparing for employee training, either by developing training, pursuing a copy of IDHR model training or engaging a consultant/law firm to provide employee training.

If you have questions regarding the WTA's implications for employers or would like assistance in reviewing or drafting policies or training employees, please contact David E. Morrison or any other member of the firm's Labor & Employment Group.

David Morrison Principal