Seyfarth Synopsis: On August 15, 2025, Governor JB Pritzker signed into law House Bill 3638, which amends the Illinois Workplace Transparency Act (IWTA). Effective January 1, 2026, these amendments will strengthen employee protections in employment-related contracts – meaning settlement and separation agreements as well as employment contracts – by broadening the definition of unlawful employment practices, adding new protections related to concerted activity, and expanding remedies for IWTA violations.
Existing IWTA Requirements
Since January 1, 2020, the IWTA has prohibited contractual provisions that restrict an individual’s ability to report or make “truthful statements or disclosures about alleged unlawful employment practices” related to “discrimination, harassment, or retaliation”. To be enforceable, agreements with non-disclosure, non-disparagement or confidentiality language must either: (i) clearly carve out the individual’s right to make truthful statements or disclosures about alleged unlawful employment practices; or (ii) reflect the employee’s “documented preference” for non-disclosure, supported by consideration and containing review-and-revocation time periods plus other protections.
To be clear, neither the IWTA as originally enacted nor the amendments address confidentiality of the agreement. A few other states prohibit or restrict those provisions; Illinois does not.
As a practical matter, most Illinois employers and their counsel have grappled with existing IWTA requirements in the context of non-disparagement or non-disclosure language in separation and settlement agreements. Setting aside the National Labor Relations Act (NLRA), which applies to non-supervisory employees only, employers historically included broad non-disparagement language in most separation agreements. They also proposed (and frequently insisted on) such language in negotiated separation agreements and in settlements. The IWTA already restricts Illinois employers’ ability to insist on such language in that individuals must be allowed to communicate to third parties about discrimination-related facts unless the individual prefers to keep those confidential.
New IWTA Requirements
The impending amendments will protect additional employee communications and thereby further constrain employers’ ability to require non-disparagement inf separation and settlement agreements. Moreover, for employers who hope employees will agree not to discuss alleged unlawful employment practices, the amendment makes it substantially more complicated and difficult to engage with employees as to whether they may prefer confidentiality/non-disclosure, and to include full-fledged non-disparagement language generally. Among other things, the amendments expand the definition of “unlawful employment practices” to encompass work-related communications beyond discrimination, specifically those regarding wage and hour laws, workplace safety, plus NLRA-protected “concerted activity” and NLRA-prohibited unfair labor practices.
The amendments also affirmatively protect “concerted activity” itself by prohibiting employers from contractually limiting individuals from acting collectively to address workplace issues. Specifically, the amended law defines “concerted activity” as “activities engaged in for the purpose of collective bargaining or other mutual aid or protection” consistent with federal and Illinois law protections. Any contractual provision that would limit or discourage such activity will be considered contrary to public policy and therefore void and unenforceable under the amended law.
Consequently, employers who already carve out from non-disparagement or non-disclosure provisions an employee’s right to make “truthful statements or disclosures about alleged unlawful employment practices” must craft a much broader exception – one no longer limited to discrimination, harassment and retaliation claims, but that also encompasses wage-hour violations, unfair labor practices and other unlawful workplace conduct. This is consistent with more expansive protections that must be carved out of non-disclosure provisions in other states including California and Washington.
Amendments Add Damages for IWTA Violations
The consequences of violating the IWTA are also about to change. The IWTA already allows recovery of attorneys’ fees and costs by individuals who successfully establish a violation of the IWTA or successfully defend against a breach of a confidentiality claim by the employer. The amendments add consequential damages as additional recourse for current or former employees. This incentivizes and provides leverage for opposing counsel or employees to challenge settlement or separation agreements if an employer proposes terms or omits safeguards in violation of the new IWTA.
Special Considerations With Separation and Settlement Agreements
While the IWTA permits confidentiality provisions in separation and settlement agreements if confidentiality is the employee’s “documented preference”, the amended law imposes stricter requirements for such provisions. These will make it markedly more difficult for employers to raise and navigate confidentiality unless employees explicitly request it on their own initiative. Most notably, a confidentiality provision in such agreements must now be supported by “separate” consideration – a specific monetary amount apart from consideration in exchange for a release of claims and other separation or settlement agreement provisions. Although the amendments do not expressly require that separate amount be set forth in the agreement, this is the only way to establish its existence as a matter of undisputed fact. In addition, the amendments expressly prohibit employers from unilaterally including language stating confidentiality is the employee’s preference – putting a stop to a drafting tack used by employers who wished to silence employees under the old IWTA.
Consequences For Employers
Even under the current IWTA, it is unwieldy at best for employers to obtain the employee’s preference regarding confidentiality as part of an ordinary course, non-executive separation. Whether or not severance is provided pursuant to an ERISA severance plan, and whether or not individual severance negotiations are permitted under ERISA, most employers as a general rule view non-executive severance amounts and other agreement particulars as non-negotiable. Typical termination meetings are not a “negotiating conference” to which both parties come prepared to discuss their respective wants and preferences. Indeed, absent advance notification required under rare circumstances covered by federal and Illinois WARN laws, non-executives are routinely notified of termination effective later that week or even that day.
Ascertaining employee preference for confidentiality and negotiating separate consideration for a confidentiality promise is more feasible in the contexts of executive exit and settlement agreements, wherein terms are typically “bargained for”, i.e., negotiated: The employee or their counsel may raise the subject of confidentiality regarding employment-related facts. Or the employer can ask outright if the employee would prefer to keep those facts confidential, so long as it at the same time makes clear the employee’s preference is determinative.
Even in these contexts, however, the amendments raise new hurdles to confidentiality, even when that is the employee’s articulated preference. To satisfy the new “separate” consideration requirement, employers must apportion consideration between the confidentiality promise and the rest of a separation or settlement agreement. That invites the executive or former employee not only to express their preference as to confidentiality, but also to make counter-offers to both parts of the employer’s monetary offer. If the individual or their counsel thinks they have leverage with regard to confidentiality, there is no limit to what they may seek. And, simply by introducing the topic, an employer may cause the individual to think about additional claims or other “ammunition” they may possess. Further back-and-forth over that separate consideration amount will inevitably complicate and likely prolong separation and settlement negotiations. Indeed, it could in some instances “tank the deal”– precluding the parties from resolving executive exit terms short of litigation, or prolonging litigation already underway. In these events, the employer’s attempt to obtain confidentiality will have backfired. With no agreed restraint on “disclosure” rights, the individual is left agitated and emboldened to communicate freely about alleged unlawful employment practices. While that same right to communicate would attach for individuals quietly presented with a simple carve-out, the employer who tries and fails to negotiate a confidentiality package will have inadvertently encouraged a disgruntled individual to speak out.
Having said it is and will become more difficult logistically to negotiate confidentiality with non-executives, does that mean it is impossible? No. For employers who wish to seek confidentiality whenever possible, we can help brainstorm possible solutions. One might be a supplemental severance schedule covering all non-executives containing separate amounts for confidentiality determined as a percentage of the individual’s base pay. Individuals could elect the additional payment in their separation agreement in exchange for confidentiality. Perhaps individuals could alternatively be enabled to make a single counter-offer, one the employer is free to reject. If the individual preferring confidentiality accepts the employer’s number, or if the employer accepts the individual’s counter-offer, the agreement will contain confidentiality; if not, the individual is free to disclose/communicate as provided under the new IWTA.
