New Illinois Employment Laws on AI and Tax Credits Just Announced
BREAKING NEWS: Two significant employment laws affecting Illinois employers and employees have just been announced. The first, under House Bill 3737, restricts the use of artificial intelligence (AI) in hiring and will take effect on January 1, 2024. The second introduces a new tax credit for employers who hire formerly incarcerated individuals and is already in force.
Under the AI law, employers in Illinois—along with employment agencies and unions—are prohibited from using AI that could lead to discrimination against protected classes in hiring, promotions, or any employment-related decisions. This means that practices like using ZIP codes as a proxy for discrimination will no longer be tolerated. Employers must also notify employees when AI is utilized in decision-making processes, ensuring transparency in hiring practices.
The term “artificial intelligence” is defined under this law as a system that infers predictions, recommendations, or decisions based on input data. This includes generative AI that produces human-like content, such as essays or images. If an employee believes they have been discriminated against due to AI use, they can file a complaint with the Illinois Department of Human Rights (IDHR). The IDHR will investigate to determine if there is substantial evidence for the claim and can escalate the matter to the Illinois Human Rights Commission if warranted.
Violations can lead to serious consequences for employers, including civil penalties ranging from $16,000 to $70,000, along with actual damages like lost wages and attorneys’ fees.
In addition to the AI regulations, a new tax credit program has been rolled out for employers hiring individuals with prior incarceration records. This initiative aims to support reintegration into the workforce, with employers eligible for a tax credit of up to $7,500 for each qualifying employee. This credit applies to wages paid within the first year of employment, and employers can claim up to $1 million in tax credits annually.
To qualify for this tax credit, employers must hire individuals who have been convicted of a felony, not classified as sex offenders, and employed within five years of their release from an Illinois correctional facility. The process to apply for the credit will be available through MyTax Illinois starting January 1, 2024.
It’s important to note that this new law is separate from the Federal Work Opportunity Tax Credit (WOTC), which also incentivizes hiring individuals facing barriers to employment. Under WOTC, employers can receive up to $2,400 based on the hours worked by qualifying hires.
These legislative changes reflect a growing commitment to combat discrimination in hiring practices and support job opportunities for previously incarcerated individuals. As these laws take effect, employers in Illinois will need to adapt their hiring practices to remain compliant and take advantage of available tax incentives.
Stay tuned for updates as the situation develops and more details emerge about the implementation of these new laws.
