By Danielle R. Rabie, Megan P. Toth, and Erin Dougherty Foley

Seyfarth Synopsis: On February 19th and 26th, 2021, Illinois legislatures introduced new bills that, if passed, would get rid of at-will employment, only allowing employers to terminate employees for just-cause, and require severance pay for terminated employees, effective January 1, 2022.

On February 19th and February 26th, 2021, the Illinois House (HB 3530) and Senate (SB 2332) respectively introduced twin bills titled the Employee Security Act (“the Act”). If passed, the Act would abrogate the long-standing doctrine of at-will employment in Illinois, effective January 1, 2022.

Currently, Illinois — like most states — is an “at-will employment” state, which means employers have the right to terminate an employee at any time for any reason, except an illegal one, or for no reason at all and employees are free to leave a job at any time for any or no reason without adverse legal consequences. The proposed legislation, if passed, however, would impose at least two new significant obligations on employers when terminating Illinois employees, including: (1) only allowing employers to terminate employees for just-cause and (2) requiring employers to provide mandatory severance to employees upon termination.

Termination for “Just Cause” — What Does That Mean?

The proposed law defines “just-cause” as a termination where: (1) the employee failed to satisfactorily perform his or her job duties or comply with employer’s policy and the employer utilized a progressive discipline schedule; (2) the employee’s misconduct was egregious; or (3) the employer had a “bona fide economic reason[i]” for termination. The Act, as drafted, further explains that just-cause cannot be based on off-duty conduct unless there is a nexus between the conduct and the employee’s job performance or legitimate business interests.

Further, in order to justify terminations resulting from an employee’s failure to comply with employer policy or failure to satisfactorily perform job duties as “just cause” under the new law, employers will be required to use a progressive discipline system under which they may not terminate an employee within 15 days of a first warning, nor rely on a disciplinary action issued more than one year prior to justify termination. This effectively creates a one year mandatory “refresh” on the employee’s disciplinary record. Even under a progressive discipline scheme, however, the Act would allow an employer to immediately terminate an employee for “egregious misconduct.” While many employers use progressive discipline as a means to termination already, this proposed legislation imposes strict (and very employee-friendly) requirements for what progressive discipline must look like before termination is allowed, rather than allowing employers the discretion to define and impose their own progressive discipline standards.

Required Severance

In addition to requiring that terminations must be for just cause, the proposed legislation would also impose severance pay requirements upon termination in certain situations. Under the Act, as currently drafted, terminated employees will be entitled to one hour of severance pay for every 12.5 hours worked during the employee’s first year of employment and one hour for every 50 hours worked thereafter paid at the employee’s normal rate of pay. Under the current version of the bill, it is unclear precisely how these total hours would be calculated. This severance calculation could be based on actual hours worked, scheduled hours worked, and could or could not include compensated time off. Additionally, these calculations could also vary depending on whether the employee was exempt or non-exempt, hourly, or salaried. Without further guidance, it is unclear how each of these variables will play into the final calculation.

What this Means for Employers with Illinois Employees

While this bill is still in its early stages, if passed, would take effect January 1, 2022, and would substantially change the landscape of at-will employment in Illinois. Employers should be on the lookout for status updates on this bill as it progresses through various stages of committee review. Employers who feel strongly opposed to this bill may wish to consult with a lobbyist or their state legislative representative regarding their concerns. Should this Bill become law, Illinois employers need to be prepared to review and revise their termination practices, from progressive discipline terminations to reductions in force and everything in between.  We will continue to monitor the progress of this Bill and report back with any future developments.

[i] The proposed legislation provides that a discharge as a result of staff redundancies caused by merger or acquisition are not bona fide economic reason and that a discharge will not be presumed to be based on a bona fide economic reason if the employer hires another employee to perform substantially the same work within 90 days of the employee’s termination.