What the Illinois Workplace Transparency Act Requires

The Illinois Workplace Transparency Act, codified at 820 ILCS 96, limits what employers can put in offer letters, handbooks, and settlement papers when the subject is harassment, discrimination, retaliation, or other unlawful workplace conduct. One-sided confidentiality and arbitration clauses imposed as a condition of getting or keeping a job are void. Mutual agreements and settlement NDAs are still allowed, but only if they meet a detailed checklist. The Act also works together with changes to the Illinois Human Rights Act that require annual sexual harassment training, protect contractors on your worksite, and force employers to report adverse judgments each year.

Clauses the Act Voids in Employment Contracts

Under 820 ILCS 96/1-25, any clause that is a unilateral condition of employment or continued employment and that prevents a worker from making truthful statements or disclosures about unlawful conduct in the workplace is void. The offending clause is severed; the rest of the contract can survive.¹

The same section reaches mandatory arbitration. A one-sided clause that forces a worker to arbitrate, waive, or diminish a claim tied to unlawful employment practices is void to the extent it takes away a right the worker would otherwise have under state or federal law. That includes clauses shortening the statute of limitations, picking another state’s law for an Illinois worker’s claim, or requiring litigation outside Illinois.¹ Boilerplate arbitration language in onboarding packets often falls into this category.

When Confidentiality or Arbitration Clauses Still Hold

The law separates clauses imposed on workers unilaterally from genuinely mutual agreements. A mutual agreement can contain provisions that would otherwise be void, but only if it is in writing, reflects actual knowing consideration from both sides, and expressly acknowledges the worker’s right to:

File good-faith complaints about unlawful practices or criminal conduct with any federal, state, or local enforcement agency
Participate in proceedings brought by government agencies or by other individuals
Make truthful disclosures required by law, regulation, or legal process
Consult confidentially with an attorney
Engage in concerted activity with coworkers about work-related issues

Miss any of those elements and a rebuttable presumption treats the clause as a one-sided condition of employment, which makes it void.¹

Rules for Settlement and Separation Agreement NDAs

Confidentiality clauses in settlement and separation agreements get a separate rulebook. P.A. 104-320 updated these requirements effective January 1, 2026, and the list is longer than most employers assume.² To include a valid confidentiality clause about alleged unlawful employment practices, all six of the following must be true:

Confidentiality is the documented preference of the worker. The employer cannot drop in a line declaring that it is.
The employer gave the worker written notice of the right to have an attorney or representative review the agreement before signing.
There is valid, bargained-for consideration specifically for the confidentiality promise, separate from consideration for a release of claims. A single lump sum covering both may not satisfy this.
The agreement does not waive claims of unlawful employment practices that arise after it is signed.
The worker had 21 calendar days to review the written agreement, which can be shortened only by a knowing and voluntary waiver.
The worker has 7 calendar days after signing to revoke, and the agreement does not take effect until that window closes, unless that right is knowingly and voluntarily waived.

An employer also cannot unilaterally insert a clause that prohibits the worker from making truthful statements about unlawful employment practices. If any requirement is missing, the confidentiality promise is void and severable. The worker keeps whatever severance or payment was provided and is free to discuss the underlying conduct.²

Right to Testify and What Workers Recover

No agreement of any kind can waive a worker’s right to testify in an administrative, legislative, arbitral, or judicial proceeding about alleged criminal conduct or alleged unlawful employment practices. Section 820 ILCS 96/1-40 makes that right absolute, regardless of what any other law says, and it survives even a settlement that otherwise contains a valid confidentiality clause.³

A worker who successfully challenges a contract that violates the Act, or who defends against a lawsuit for breaching an unenforceable confidentiality clause, is entitled to consequential damages plus reasonable attorney’s fees and costs. That fee-shift changes the math for an employer thinking about enforcement.³

Who Counts as an Employer and Who Is Protected

The Act borrows its definition of “employer” from the Illinois Human Rights Act. For claims involving sexual harassment, pregnancy discrimination, or disability discrimination, the threshold is any person employing at least one worker in Illinois. For other kinds of discrimination, an employer must have one or more employees during at least 20 calendar weeks in the current or preceding year. State and local government entities, public contractors, and joint apprenticeship programs are covered regardless of headcount.⁴

Protections reach beyond payroll employees. Under 775 ILCS 5/2-102, employers cannot harass nonemployees performing services directly under a contract, a category the statute defines to include contractors and consultants. For harassment by non-managerial or non-supervisory staff, the employer is liable only if it becomes aware and fails to take reasonable corrective action.⁵ A hostile environment directed at a contractor is not a free pass for the company.

Annual Training, Policies, and Judgment Disclosure

Every employer with workers in Illinois must provide sexual harassment prevention training to all employees at least once a year. The Department of Human Rights publishes a free model program, and employers can use it or build their own as long as it covers the statutory minimums: what sexual harassment is under the Illinois Human Rights Act, examples of unlawful conduct, a summary of relevant federal and state laws and the remedies available, and the employer’s duties around prevention, investigation, and corrective action.⁶

Extra Obligations for Restaurants and Bars

Restaurants and bars have another layer under 775 ILCS 5/2-110. Each new employee must receive a written sexual harassment policy within the first calendar week of employment. The policy has to prohibit sexual harassment, define it in line with both the Illinois Human Rights Act and Title VII, explain internal reporting and how to file a charge with the Department of Human Rights or the EEOC, prohibit retaliation, and require participation in training. It must be available in English and Spanish. These employers also owe supplemental, industry-specific training on top of the annual program, which the Department has published in English and Spanish.⁷

Penalties for Noncompliance

An employer that fails to provide required training first gets a notice to show cause and 30 days to come into compliance. If the employer still has not complied, the Department petitions the Illinois Human Rights Commission for civil penalties.⁶ Penalty amounts depend on employer size and prior offenses:

Employers with fewer than 4 employees: up to $500 for a first offense, up to $1,000 for a second, and up to $3,000 for a third or subsequent offense.
Employers with 4 or more employees: up to $1,000 for a first offense, up to $3,000 for a second, and up to $5,000 for a third or subsequent offense.

The same tiers apply to violations of the annual disclosure rules in 775 ILCS 5/2-108 and the supplemental training rules in 775 ILCS 5/2-110. The Commission weighs the employer’s size, good-faith compliance efforts, and the seriousness of the violation when setting an amount.

Annual Report of Adverse Judgments

By July 1 of each year, any employer that had an adverse judgment or administrative ruling against it in the preceding calendar year involving sexual harassment or unlawful discrimination must report that information to the Illinois Department of Human Rights. The filing covers judgments and rulings, not routine settlements. When the Department is actively investigating a charge, it can require the responding employer to produce aggregate settlement counts from the preceding five years, broken out by protected category, with individual names kept confidential.⁸

A Federal Tax Hook on Harassment Settlement NDAs

Internal Revenue Code Section 162(q), added by the Tax Cuts and Jobs Act, denies the employer any deduction for a settlement or payment related to sexual harassment or sexual abuse if the payment is subject to a nondisclosure agreement. Attorney’s fees tied to that settlement are also nondeductible on the employer’s side.⁹ Because unilateral confidentiality is already void under the Workplace Transparency Act and valid confidentiality carries its own procedural cost, the federal tax penalty pushes the analysis further away from secrecy. The restriction does not reach the employee’s side; recipients can still deduct their own attorney’s fees if those fees are otherwise deductible under the tax code.

1
Illinois General Assembly. Illinois Code 820 ILCS 96/1-25 – Conditions of Employment or Continued Employment
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Illinois General Assembly. Illinois Code 820 ILCS 96/1-30 – Settlement or Termination Agreements
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Illinois General Assembly. Illinois Code 820 ILCS 96 – Workplace Transparency Act
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Illinois General Assembly. Illinois Code 775 ILCS 5/2-101
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Illinois General Assembly. Illinois Code 775 ILCS 5/2-102 – Civil Rights Violations; Employment
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Illinois General Assembly. Illinois Code 775 ILCS 5/2-109 – Sexual Harassment Prevention Training
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Illinois General Assembly. Illinois Code 775 ILCS 5/2-110
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Illinois General Assembly. Illinois Code 775 ILCS 5/2-108 – Employer Disclosure Requirements
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Internal Revenue Service. Certain Payments Related to Sexual Harassment and Sexual Abuse