On August 15, 2025, Governor Pritzker signed House Bill 3638, amending the Illinois Workplace Transparency Act (IWTA). The changes take effect on January 1, 2026 and apply to contracts entered into, renewed, or modified on or after that date. Employers that rely on confidentiality, arbitration, or separation agreements will need to act quickly to bring their documents into compliance.
Background
The Illinois Workplace Transparency Act was enacted in 2019 to regulate agreements between employers and employees, including former employees with regard to Federal and state employment discrimination laws. The Act regulates both employment agreements and settlement or termination agreements with former employees, including confidentiality agreements that are included in settlement or termination agreements.
Key Changes to Know
Broader Protections
The law expands the definition of “unlawful employment practice” well beyond harassment and discrimination. Now, agreements cannot restrict disclosures or rights related to wage and hour issues, workplace safety, or other employment practices that are regulated by Federal or State employment laws, including those enforced by the United States Department of Labor, the Illinois Department of Labor, OSHA, or the National and Illinois Labor Relations Boards.
Protection for Concerted Activity
Employers may no longer include terms that prevent employees or former employees from engaging in collective discussions about workplace conditions, pay, or other employment issues.
Limits on Unilateral Contract Terms
Employers cannot unilaterally impose shortened statutes of limitation, out-of-state choice of law provisions, or out-of-state venues for Illinois claims. Such terms may survive only if entered into as part of a mutual, negotiated agreement that meets strict requirements.
Confidentiality in Settlement and Severance
Confidentiality clauses are still permitted, but the rules are much tighter:
- Confidentiality must be supported by separate, bargained-for consideration.
- The employee must truly prefer confidentiality—it cannot be imposed by default.
- Agreements cannot prevent an employee from testifying, participating in proceedings, or engaging in protected collective activity.
Expanded Remedies
If an agreement violates the IWTA, the offending clause is void. Employees may also recover consequential damages, in addition to attorney’s fees and costs, if employers attempt to enforce non-compliant provisions.
What Employers Should Do Now
- Audit Your Agreements
Review all employment, severance, settlement, arbitration, and confidentiality agreements currently in use with Illinois employees and contractors. - Revise Templates
Remove or re-draft clauses on confidentiality, choice of law, venue, and statutes of limitation to align with the new requirements. - Train HR and Leadership
Ensure staff responsible for negotiating agreements understand the new restrictions and the need for genuine mutuality. - Prepare for Employee Questions
Employees and applicants may become more aware of these rights as 2026 approaches. Clear communication can build trust and reduce disputes. - Stay Alert for Further Guidance
As with many new employment laws, early litigation and agency guidance will clarify the gray areas. Employers should monitor developments closely.
The Bottom Line
HB 3638 reflects Illinois’ continuing trend of expanding workplace protections and limiting restrictive contract terms. Employers that act now—by auditing agreements, redrafting templates, and training staff—will be ready when the law takes effect on January 1, 2026. Waiting until contracts are challenged could expose businesses to unnecessary risk.