January 27, 2022
We wish our clients and friends a healthy, happy, and prosperous 2022. Our January Legal Update highlights new laws and amendments that may be of interest to Illinois businesses and individuals. We encourage all those potentially affected by these developments to consult with counsel to ensure that they are in compliance with, or consider taking advantage of, these new laws.
New Illinois Laws and Amendments Effective January 1, 2022
Fiduciary Duty Amendments under Amended Illinois Limited Liability Company (LLC) Act
Illinois has amended its LLC Act to address the general standards of conduct for members and managers of LLCs as well as fiduciary duty requirements for LLC operating agreements. The Act now states that in addition to the duty of loyalty and duty of care, the implied contractual covenant of good faith and fair dealing also applies to members and managers of an LLC and LLC operating agreements in the same manner as other contracts and parties. The amended Act also includes new requirements with respect to fiduciary duties for LLC operating agreements entered into or modified on or after January 1, 2022. These operating agreements may not eliminate or reduce the implied contractual covenant of good faith and fair dealing and may only eliminate or restrict other fiduciary duties of members and managers if such restriction or elimination is clear and unambiguous in the agreement. LLC operating agreements may still identify specific types of activities that would not violate any fiduciary duty and determine the standards by which the performance of a fiduciary duty is to be measured.
Remote Shareholder Meetings Permitted under Amended Business Corporations Act (BCA)
The amended BCA now allows shareholders to participate and act in meetings by means of remote communication as long as the corporation’s articles of incorporation or by-laws do not specifically prohibit such methods. Remote communication methods may include telephone conferences, interactive technology, electronic transmission, or Internet usage. Under the amended BCA, those participating in meetings via remote communication will be deemed present and may vote if the corporation has implemented reasonable measures to: (1) verify each person participating remotely as a shareholder is a shareholder; and (2) provide to such shareholders a reasonable opportunity to participate and vote on matters submitted to shareholders.
New LGBTQ Reporting Requirements for Publicly Held Companies under Amended BCA
Effective January 1, 2022, publicly held Illinois or foreign corporations with principal executive offices in Illinois must indicate in their annual report filings with the Secretary of State the self-identified sexual orientation and gender identity of each member of their boards of directors. Illinois already requires such corporations to annually report on the race, ethnicity, and gender of their boards, among other information. Illinois will establish a rating system assessing the representation of women, minorities, and LGBTQ individuals serving on boards of those corporations based on the reported information.
Electronic Signatures Permitted under Amended Secretary of State Act
An amendment to the Illinois Secretary of State Act now authorizes the Secretary of State to accept filings of documents signed electronically. An electronic signature must meet all of the following requirements: (1) be executed or adopted by a person with the intent to sign the document; (2) be attached or logically associated with the information contained in the document being signed; (3) be capable of reliable authentication and identification of the person as the signer; (4) be linked to the document in a manner that would invalidate the e-signature if the document is changed; (5) be linked to the document so as to preserve its integrity as an accurate and complete record for the full retention period of the document; and (6) be compatible with the standards and technology for e-signatures generally used in commerce, industry, and by state governments.
Entrepreneurship and Small Business Amendments to Department of Commerce and Economic Opportunity (DCEO) Law
The newly amended DCEO Law directs the DCEO to establish and support entrepreneurship assistance centers at career education agencies and non-for-profit corporations (e.g., local development corporations, chambers of commerce, community-based business outreach centers, and other community-based organizations). Among other requirements, the entrepreneurship assistance centers must train minority group members, women, individuals with disabilities, dislocated workers, and veterans in the principles and practice of entrepreneurship in order to prepare those persons to pursue self-employment opportunities and a minority business enterprise or a women-owned business enterprise.
Illinois has also amended the DCEO Law to create the Illinois Small Business Fund, a non-appropriated separate trust fund in the Illinois Treasury. The DCEO will use the Fund to manage proceeds from investments that the DCEO has undertaken through economic development programs and may use funds to reinvest in small business and economic development initiatives through grants or loans.
Amendments to Illinois Freedom to Work Act
The amended Freedom to Work Act imposes new restrictions on employers and establishes specific requirements for the enforceability of restrictive covenant agreements in Illinois. Among other requirements for agreements entered into on or after January 1, 2022, non-competes may only be used with employees who earn more than $75,000 per year, and non-solicits may only be used with employees who earn more than $45,000 per year. The Act has also codified Illinois case law governing restrictive covenants, notably the Illinois Appellate Court decision in Fifield v. Premier Dealer Services, Inc. Under Fifield and the Act, an employee must receive “adequate consideration” for non-competition and non-solicitation to be enforceable. The Act now defines “adequate consideration” to be at least two years of continued employment or other consideration such as “professional or financial benefits.” For more information on the changes to the Freedom to Work Act, please see our July 2021 newsletter.
Increases to Minimum Wage under Illinois Minimum Wage Law (IMWL)
For the third consecutive year, Illinois has increased its minimum wage, which, as of January 1, 2022, is $12.00 per hour. The IMWL further increases the minimum wage every year until it reaches $15.00 per hour in 2025. Employers must comply with the highest applicable minimum wage rate. For more information regarding the minimum wage requirements in the City of Chicago, Cook County, and the State of Illinois, please see our January 2021 newsletter. While the Illinois minimum wage is currently $12 per hour, the federal minimum wage is still $7.25 an hour. However, beginning January 30, 2022, President Biden’s Executive Order increasing the minimum wage for employees on federal contracts goes into effect. The new minimum wage for federal contract workers is $15 an hour.
Protection for Association with a Disabled Person under Amended Illinois Human Rights Act (IHRA)
Illinois has expanded the definition of unlawful discrimination based on a disability under the IHRA. The expanded definition now also prohibits discrimination against an individual based on an individual’s association with a person with a disability. The IHRA applies to employers with one or more employees within Illinois.
New Employer Requirements under Amended Illinois Artificial Intelligence Video Interview Act
Employers that rely solely on artificial intelligence analysis of a video interview to determine whether to select a job applicant for an in-person interview must now collect demographic information regarding the race and ethnicity of applicants who are not selected for in-person interviews and of applicants who are hired. Employers must report this information to the Illinois Department of Commerce and Economic Opportunity by December 31st each year. For more information regarding the Act, please see our January 2020 newsletter.
Amendment to Illinois Personnel Record Review Act
The amended Illinois Personnel Record Review Act now provides individuals with the right to file a complaint or commence an action if an employer or former employer unlawfully discloses an employee’s disciplinary report, letter of reprimand, or other disciplinary action to a third party without providing written notice to the employee or otherwise satisfying the requirements of the Act. The Act requires employers with five or more employees to allow employees to inspect their personnel files and to comply with other requirements regarding employees’ personnel records.
Additional Time for Illinois Commerce Commission Orders under the Amended Public Utilities Act
The amended Illinois Public Utilities Act now extends the period for which the Illinois Commerce Commission may issue an interim order regulating a public utility’s provision of service to a customer without a hearing (if circumstances do not reasonably permit the holding of a hearing) from 15 to 45 days.
Ethics Reform Amendments to the Illinois Governmental Ethics Act and Related Acts
Illinois has adopted a number of changes to the state’s lobbying, disclosure of conflicts of interest, and campaign finance rules under the Illinois Governmental Ethics Act and related statutes. Among other changes, the amended Lobbyist Registration Act now requires (i) annual state registration for lobbying—as well as the soliciting of others to lobby—for compensation at the municipal, county, or township government level, and (ii) new reporting and registration requirements for outside consultants who provide advice to lobbyists under certain circumstances. Other changes also broaden various prohibitions against lobbying for compensation and post-employment restrictions for governmental officials.
New Requirements for Automatic Contract Renewals under the Automatic Contract Renewal Act
Illinois has amended the Automatic Contract Renewal Act to make it easier for consumers to cancel their automatic contract renewals. The amended Act, which regulates the automatic renewal of consumer contracts for products or services, now requires that sellers who offer automatic renewal or continuous service online must provide: a toll-free telephone number, email address, a postal address if the seller directly bills the consumer, or another “cost-effective, timely, and easy-to-use” mechanism for cancellation. Moreover, if a consumer accepts an automatic renewal or continuous service offer online, the seller must allow the consumer to terminate the automatic renewal or continuous service exclusively online.
Limitations on Attorney Malpractice Claims under Amended Illinois Code of Civil Procedure
Illinois has amended the Code of Civil Procedure to include a six-year statute of repose for attorney malpractice claims where the injury did not occur until the death of the person who received the professional services (e.g., estate planning services). A statute of repose is a rule of law that sets the deadline for when a plaintiff must bring an action against a defendant. Under a statute of repose, the deadline begins running on the date of a defendant’s allegedly wrongful act—regardless of whether a plaintiff’s injury occurs at that same time or at some later point in time. Applied here, a plaintiff who intends to assert a malpractice claim against a decedent’s attorney may not bring a claim more than six years from the date that the attorney performed the professional services.
New Protecting Household Privacy Act (PHPA)
Illinois became the first state to pass legislation that places restrictions on law enforcement agencies from obtaining personal household electronic data from household electronic devices (e.g., video doorbells, smart televisions or appliances that connect to the internet, and voice-activated “assistants”) or directing private third parties (e.g., internet provider) to acquire such personal household data. The PHPA does allow law enforcement agencies to obtain household data if they have a warrant, consent, or in certain emergencies. Data obtained by law enforcement agencies in violation of the PHPA will be presumed to be inadmissible in any judicial or administrative proceedings. The PHPA, however, does not apply to personal computers, cell phones, smartphones, or tables, or modems, routers, wireless access points, or cable set-top boxes serviced by a cable provider.
Mandatory Disclosure of Call Location Information to Law Enforcement
Illinois has amended the Department of State Police Law, which now requires wireless service providers to provide call location information concerning a user’s telecommunications device to a requesting law enforcement agency (or public safety answering point on behalf of a law enforcement agency). The statute, however, prohibits law enforcement agencies and public safety answering points from requesting call location information unless for the purposes of responding to a call for emergency services or in an emergency situation that involves the risk of death or serious bodily harm.
Constitutional Protections for Police Interrogations of Minors under Amended Juvenile Court Act
Illinois is the first state to ban police from using deceptive tactics while interrogating minors. Under the amended Juvenile Court Act, if a law enforcement officer uses deception (i.e., “the knowing communication of false facts about evidence or unauthorized statements regarding leniency by a law enforcement or juvenile officer”), to secure a confession by a minor, the confession is presumed to be inadmissible in a criminal or juvenile proceeding. At least one other state, Florida, has now proposed similar legislation.
Hate Crime Amendments to Illinois Criminal Code
Illinois has expanded the definition of a hate crime under the Criminal Code to prohibit crimes committed against a person based on the person’s “actual or perceived… citizenship [or] immigration status.” In general, a hate crime under Illinois law is the commission of certain crimes (e.g., assault, battery) because of the actual or perceived “race, color, creed, religion, ancestry, gender, sexual orientation, physical or mental disability, citizenship, immigration status, or national origin” of another individual or group of individuals regardless of the existence of any other motivating factors.
New Higher Education Fair Admissions Act
Illinois has passed the Higher Education Fair Admissions Act, which implements a test-optional policy as part of the undergraduate admissions process for public universities, colleges, and community colleges in Illinois. Illinois public universities, colleges, and community colleges may no longer require Illinois residents to submit standardized test scores (e.g., SAT or ACT) as part of the admissions process, and Illinois students may now choose whether to submit their test scores as part of their applications.
Various Amendments to Illinois School Code
Illinois now prohibits schools from discriminating against student hairstyles historically associated with race, ethnicity, or hair texture. These hairstyles include protective hairstyles such as braids, locs, afros, and twists. This law is known as the Jett Hawkins Law and named after a four-year-old Black student who was instructed to take out his braids because his hairstyle violated the school dress code.
Illinois has amended the School Code to require that temporary excused absences caused by illness to include absences for the mental or behavioral health of the child for up to five days without needing to provide a medical note. The school must give the student an opportunity to make up any schoolwork missed during such mental or behavior health absence. After a student uses a second mental health day, the student may be referred to appropriate school support personnel.
Finally, Illinois is the first state to require public schools to teach Asian American history beginning with the 2022–23 school year. All public elementary and high schools in Illinois will be required to include in their curriculum a unit of instruction studying Asian American history, including the history of Asian Americans in Illinois and the Midwest specifically.
Removal of Unlawful Restrictive Covenants under Amended Counties Code
Prior to this amendment, it was a long and arduous process to remove an unlawful restrictive covenant from a deed for property. Now the process to remove unlawful restrictive covenants from recorded property interests (e.g., property deeds) is streamlined. The unlawful covenants include those that purport to forbid or restrict the conveyance, encumbrance, occupancy, or lease of the property based on race, color, religion, or national origin. A petition to modify an unlawful restrictive covenant may now be filed by a person or an entity who: (1) holds an ownership interest in property that is subject to the unlawful restrictive covenant; or (2) is a common interest community association, a condominium association, a unit owners’ association, a residential housing cooperative, or a master association of a parcel of property subject to an unlawful restrictive covenant. The petition to modify an unlawful restrictive covenant must be submitted to the recorder who will then submit the restrictive covenant modification and the original instrument referenced in the modification to the State’s Attorney. The recorder may only record the modification once the State’s Attorney determined that an unlawful restrictive covenant exists. The fee for the process can be no more than $10, which will be submitted to the recorder.
Juneteenth National Freedom Day
Juneteenth National Freedom Day is now a state holiday observed on June 19th of every year. State employees will have a paid day off to commemorate Juneteenth. Juneteenth will also be recognized as a legal school holiday. If Juneteenth falls on a Saturday or a Sunday, the preceding Friday and the following Monday will not be a paid holiday.
New Illinois Laws and Amendments Effective September 2021
New Climate and Equitable Jobs Act
After years of energy policy negotiations, on September 15, 2021, Governor Pritzker signed the nearly 1,000-page Climate and Equitable Jobs Act into law. This landmark legislation includes sweeping changes to energy practices and utility regulation in Illinois. Among other changes, the Act amends the Illinois Environmental Protection Act to require greenhouse gas-emitting generation facilities, including fossil-fueled and natural gas-fired generation facilities, to reduce emissions and close by certain deadlines. For more information regarding this omnibus energy legislation, please see our September 2021 newsletter.
Other Recent Amendments to Energy Regulation
Relatedly, the Illinois legislature also passed Public Act 102-0673, which enacts various other amendments concerning energy regulation, including electric vehicles, which began to go into effect last year. As of September 15, 2021, the amended Electric Vehicle Act requires applicants for grants or rebates subsidizing the installation costs for charging stations to comply with the Prevailing Wage Act for installation of a charging station. The amended Illinois Enterprise Zone Act now requires that contractors and subcontractors for a “high impact business” construction jobs project make and keep records regarding their workers’ race, ethnicity, and gender. Further, under the amended Prevailing Wage Act, the definition of “public works” now includes the construction of a new utility-scale solar power facility by a “high impact business,” electric vehicle charging station projects financed pursuant to the Electric Vehicle Act, and renewable energy projects required to pay the prevailing wage pursuant to the Illinois Power Agency Act. Illinois also amended the Public Utilities Act to remove an exemption for certain wind and solar energy suppliers from reporting of procurement goals and actual spending for female-owned, minority-owned, veteran-owned, and small business enterprises.
Please note that this Legal Update is not comprehensive of all of the new laws that may affect you or your business and provides an overview for informational purposes only. It is general in nature and is not intended to constitute legal advice or to take into account all of the exceptions, exemptions, and nuances that may apply to you or your business. Certain laws that we do not mention, including new federal laws and laws in other states, may nonetheless affect you or your business. You should consult with your legal and other advisors about the entire legal landscape that may impact you or your business.