2023 Compensation Check Up: Legal Updates

Authors Laura Friedel, Becky Canary-King

Compensation is always a top-of-mind issue for employers, but on the heels of the “Great Resignation,” and amidst ongoing labor shortages, economic uncertainties and evolving legal requirements, many employers are reassessing their compensation practices.

In addition to compensation best practices to assist with attracting and retaining talent, employers must make sure to comply with state-specific legal requirements. Here we share new legal requirements for employers.

  1. Prepare to Apply for Illinois Equal Pay Registration Certificate. Employers with 100 or more employees in Illinois must apply for the Certificate between March 24, 2022, and March 23, 2024, and recertify every two years after that. Companies will be notified by the Department of Labor when it is time for them to register and will be given at least 120 days’ notice of their individual deadline. Employers will need to provide certain pay, demographic, and other data as part of the application process. If you have not received the notice from the Department of Labor yet, get started now by considering how you will answer the questions in the compliance statement and report the necessary information.
  2. Ensure Job Postings Comply with New Pay Disclosure Requirements. California, New York City, and Washington State have joined Colorado in requiring some or all employers to disclose wage ranges in job postings. Notably, these requirements include jobs that may be performed remotely in these states. Additionally, Rhode Island joins a growing list of states that require disclosure of the salary range for a position upon request. Employers must understand what information needs to be included in job postings to avoid inadvertently violating these laws. Employers that don’t currently practice pay transparency should also think about how they might get in front of requirements as pay disclosure laws continue to spread. Companies should also consider wage transparency and equal pay laws’ impact on the due diligence process in M&A transactions
  3. Be Aware of Minimum Wage and Minimum Salary Increases. 2023 brings minimum wage increases in many states and localities, as well as increases to the minimum salary that employees must receive to be eligible to be exempt from overtime requirements. Make sure that you are aware of – and complying with – the minimum wage and minimum salary requirements in the jurisdictions where your employees perform work, including the requirements in the locations where you have any remote employees.

For additional information on employment-related best practices, refer to LP’s 2023 Employment Law Checklist.

Illinois Strengthens Equal Pay Protections

Illinois has joined the growing list of states implementing requirements intended to avoid pay discrimination. These requirements, which are effective September 29, 2019, include a new salary history ban, a lessening of the evidentiary burden to prove pay discrimination, strengthened anti-retaliation provisions, and additional damages available to employees.  Employers need to act quickly to ensure that candidates aren’t asked about compensation history, and otherwise comply with these new standards.

The 2019 Amendments to the Illinois Equal Pay Act prohibit Illinois employers from:

  • Screening job applicants based on their salary history
  • Requesting or requiring salary history
  • Otherwise requesting or requiring applicable to disclose salary history information
  • Seeking an applicant’s salary history information from current or former employers (unless it is public record).
  • Considering or relying on compensation history voluntarily provided (without prompting) in deciding whether to offer employment , in making an offer of compensation, or in determining future compensation.

The Amendments make clear that employers may engage in discussions with applicants about their expectations with respect to compensation and benefits, but it’s critical that those conversations are forward – not historically – focused.

The amended IL EPA also makes it easier for employees to prove claims of pay discrimination – both because it expands the group of individuals the employee can compare herself to in making her claim, and because it narrows the grounds on which an employer can justify a difference in pay.

Finally, the Amendments beef up the Illinois Equal Pay Act’s retaliation provisions.  The IL EPA previously provided that Illinois employers should not interfere with, restrain or retaliate against employees who wish to inquire about, disclose, compare or discuss their wages or the wages of other employees.  The Amendments go even further though – prohibiting employers from requiring an employee to sign an agreement that would prohibit them from disclosing or discussing their pay information.

Employees bringing claims under the IL Equal Pay Act will still have five years to bring their claims, and they will still be entitled to recover the entire amount of any underpayment with interest.  But under the Amendments, they will now also have the opportunity to seek compensatory damages in certain situations, as well as punitive damages, injunctive relief and attorneys’ fees.

Illinois employers need to take immediate action to ensure that those involved in the hiring process do not inadvertently violate the new salary history ban.  We recommend implementing a policy that requires that only one or two set individuals are authorized to discuss money with candidates, and that those individuals be trained to only ask about expectations, not salary history.  In addition, in light of the soon-to-be reduced standards for proving pay discrimination, Illinois employers should consider conducting a self-audit to identify – and resolve – any pay inequality before a claim arises.