By: Jay Shattuck, Michael Best Strategies
During the Fall Session, the Illinois Chamber, joined by other business groups and labor interests were able to come to an agreement that will save Illinois employers nearly a billion dollars in higher unemployment insurance taxes. The General Assembly approved the agreement in SB 1698 which Governor Pritzker signed into law as PA 102-1105. The new law is effective January 1, 2023. The quick action was necessary to allow adequate time for the Illinois Department of Employment Security (IDES) to prepare and deliver 2023 employer tax calculations. IDES has indicated that they will be mailing the 2023 tax calculations the first week of January. See the tax parameters for 2022-2025 below.
The objectives of the Illinois Chamber to the negotiations were to minimize tax increases on employers, establish better predictability for employers and bring greater stability to the UI Trust Fund. The agreement reduces employer taxes by $913M over the next 5-years. The Trust Fund Year End Balance over the next 5 years is estimated to remain above $1.5 billion.
At the beginning of 2020, the Illinois UI Trust Fund was over $2 billion. With the COVID pandemic taking hold and mandatory business shut downs the Trust fund plunged to a deficit of over $4.5 billion requiring borrowing from the federal government.
Agreement Details
The State pays the remaining $1.363 billion in Title XII borrowing. Because Illinois failed to pay off our federal debt by the federal deadline, Illinois employers lose a portion of our FUTA tax credit and incur in 2023 a $21 per employee tax for employees earning $7,000. The FUTA tax gross revenue of $114 million will be deposited into the Illinois Trust Fund.
The target balance for the Adjusted State Experience Factor (ASEF) will increase from $1.0 billion to $1.75 billion. Labor had originally asked that it be increased to $3 billion.
The Taxable Wage Base (TWB) will increase over a five-year period by 2.4% per year. The TWB was last increased in 2009. Labor had asked that the TWB be increased by an average of 2.4% per year forever. The agreement provides for a fixed 2.4% increase per year for the first five years and then the TWB is frozen at that number. The TWB will increase from $12,960 to $14,592 over five years and will then be frozen at $14,592.
An additional $450 million of State monies will be loaned, interest free, to the UI Trust Fund. These monies will help protect against the possibility of the predicted recession being deeper than expected. The loan will be paid back, interest free, by Illinois employers over a ten-year period beginning in 2024. If in any year the July 1st Trust Fund balance is less than $1.2 billion, the $45 million repayment will be suspended for that year and the payment schedule will be extended another year. The loan payment will be made by a 3 point addition to the state adjusted experience factor.
“Speed bumps” are created to bring both sides back to the table in two years. IF no legislative agreement is reached a $500M benefit cut for labor and a $500M tax increase for business is triggered. These speed bumps have served their purposes of bringing the parties to the negotiating table and have never been enacted.
The financial portion of the agreement (federal debt payoff and $450 million to the UI Trust Fund) is embodied in SB 2801 which was approved by the Senate. The House will be taking up the measure when it returns for a lame duck session scheduled to start on January 4, 2023.
During the December 8 IDES Advisory Board Meeting, the Department reported that based on the November economic forecasts provided to IDES by Global Insights, the prior pessimistic scenario from the third quarter 2022 has now become the baseline projected forecast. This updated table consequently has had increased changes to the 2024 and 2025 average and maximum rates.
Projected Tax Parameters 2022-2025
Other unemployment insurance news: IDES is utilizing $16 million of Federal ARPA UI Modernization Funds to address system fraud, equity in access and experience and timeliness of benefit payments.
New Mandated Leave Laws
Bereavement Leave: SB 3120, sponsored by Sen. Melinda Bush (D-Grayslake)/Rep. Anna Moeller (D-Elgin) was sent to the Governor on April 28th. The bill will expand the Child Bereavement Act to include family members. The proposal also will expand up to 10 workdays of unpaid leave to pregnancy loss; unsuccessful round of intrauterine insemination or of an assisted reproductive technology procedure; a failed adoption match or an adoption that is not finalized because it is contested by another party; a failed surrogacy agreement; a diagnosis that impacts pregnancy or fertility; or a stillbirth. It has a January 1, 2023 effective date. The Chamber is neutral. PA102-1050
Employee Sick Leave Act- Amendment will Establish Act as Minimum for CBAs: SB 645 sponsored by Sen. Mike Hastings (D-Frankfort) and Rep. Jay Hoffman (D-Swansea) amends the Employee Sick Leave Act. As approved by both chambers, the measure will establish the Act as the minimum standard in a negotiated collective bargaining agreement. The Chamber is opposed. It was approved by the Governor with a January 1, 2023 effective date. PA 102-817
One Day Rest in Seven Act Changes
SB 3146, sponsored by Sen. Celina Villanueva (D-Chicago)/Rep. Lakesia Collins (D-Chicago) increases civil penalties for violation of the law. An employer with fewer than 25 employees, the civil penalty shall not exceed $250 per offense, payable to the Department of Labor, and damages of up to $250 per offense, payable to the employee or employees affected. For an employer with 25 or more employees, the civil penalty shall not exceed $500 per offense, payable to the Department, and damages of up to $500 per offense, payable to the employee or employees affected. Provides that an offense under the Act shall be determined on an individual basis for each employee whose rights are violated. The bill also changes “calendar week” to “consecutive seven-day period”. An employee who works more than 7 1/2 continuous hours will be entitled to an additional 20-minute meal period for every additional 4 1/2 continuous hours worked. Employers covered by the Act must post and keep posted, in one or more conspicuous places on the premises of the employer where notices to employees are customarily posted, a notice, to be provided by the Director of Labor, summarizing the requirements of the Act and information pertaining to the filing of a complaint. The legislation was approved by the Governor and has a January 1, 2023 effective date. The Chamber is neutral.
SB 3416, sponsored by Sen. Emil Jones, Jr. (D-Chicago) and Rep. Marcus Evans, Jr. (D-Chicago), as passed by both chambers provides that specified provisions of the One Day Rest in Seven Act do not apply to employees for whom work hours, days of work, and rest periods are established through the collective bargaining process. The Governor approved the bill which has a January 1, 2023 effective date. The Chamber is neutral. PA 102-1012
Shifting Unpaid Wage Liability for Construction Contractors
HB 5412, sponsored by Rep. Marcus Evans (D-Chicago) and Sen. Cristina Castro (D-Elgin) was sent to the Governor on May 12th. Under the Illinois Wage Payment and Collection Act, HB 5412 shifts liability for unpaid wages by a lower tiered construction contractor to the primary/general contractor. Illinois Chamber requested that the Governor veto the legislation. The effective date is June 10, 2022. PA 102-1076
The Illinois Chamber joined other opponents in offering a number of comprises to HB 5412. Ultimately, Sen. Castro, who also is the sponsor of HB 4600, advanced an amendment to HB 4600 that contained modest changes to HB 5412. Those modest changes included:
The Illinois Chamber and the coalition of opponents to HB 5412 requested the Governor to amendatory veto HB 4600 adding that all residential construction be exempt and to increase the threshold for exemption for non-residential construction to $100,000. Are request was rejected. Effective June 10, 2022. PA 102-1065
Other Employment Law Legislation
Federal Preemption of Certain Illinois Labor Acts: Included in the state government omnibus bill, HB 5186, sponsored by Rep. Will Davis (D-Hazel Crest) and Sen. Napoleon Harris III (D-Harvey) are the following Acts that will be inoperative until and unless certain federal occupational safety and health standards cease to be in effect.
Employee Washroom Act
Work Under Compressed Air Act
Underground Sewer Employee Safety Act, and
Toxic Substances Disclosure to Employees Act.
The bill was effective June 10, 2022. The Chamber supports. PA 102-1071
Child Labor: SB 3161 sponsored by Sen. Ram Villivalam (D-Chicago) and Rep. Michelle Mussman (D-Schaumburg) provides that minors under 16 years of age working as models, performers or other entertainment-related performances shall be permitted to work until 10 p.m. A waiver request for a minor to work between 12:30 a.m. and 5 a.m. may be granted if the Director of Labor, or his or her authorized representative, is satisfied that the performance by the minor during that time is critical to the success of the production, as demonstrated by true and accurate statements by the employer that filming cannot be completed at any other time of day; the filming primarily requires exterior footage of sunset, nighttime, or dawn; the filming is scheduled on the most optimal day of the week for the minor’s schooling; the employer provides a schedule to the Department of Labor of schooling and rest periods on the day before, the day of, and the day after the overnight hours to be worked; and the age of the minor is taken into account as provided by the Act or any rules adopted under the Act. A waiver request must be received by the Department at least 72 hours prior to the overnight hours to be worked. The measure was approved by the Governor with a January 1, 2023 effective date. The Chamber is neutral. PA 102-832
Human Rights Act-Hair: SB 3616, sponsored by Sen. Mattie Hunter (D-Chicago) and Rep. Jehan Gordon-Booth) amends the Illinois Human Rights Act providing that “race”, as used in the Employment Article, includes traits historically associated with race, including, but not limited to, hair texture and protective hairstyles such as braids, locks, and twists. The Chamber is neutral. It has a January 1, 2023 effective date. PA 102-1102
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