Summary of September 2025 Labor Law Updates for Chicago, Illinois
Each month, our Chicago team reviews new court decisions, statutes, agency actions, and enforcement trends affecting Illinois labor law. Below is a roundup of verified developments from September 2025 that are relevant to employers, employees, HR leaders, and workplace counsel in Illinois.
September 2025 in Illinois saw a key Supreme Court decision narrowing ambiguity in public-employer disability pay, and legislative momentum toward strengthening employee contract protections in employment agreements with the upcoming IWTA amendments. While some changes are not yet effective, employers (especially those operating in Illinois or with multi-state presence) should proactively review and update their hiring, termination, and settlement practices to anticipate these shifts. If you’re an employer, HR leader, or employee in Illinois and want help assessing how these changes affect your workplace or rights, feel free to reach out to HKM Employment Attorneys (hkm.com).
Bitner v. City of Pekin — Illinois Supreme Court Ruling
Date: September 18, 2025
Summary:
In Bitner v. City of Pekin, 2025 IL 131039, the Illinois Supreme Court addressed whether public employers may withhold employment taxes from payments made under the Public Employee Disability Act (PEDA) Section 1(b). The Court held that the statute prohibits deductions for sick leave, compensatory time, or vacation credits but does not bar withholding of employment taxes. Because the statute mandates that an injured employee continue to be paid “on the same basis,” the Court concluded that tax withholdings, if applied pre-injury, may continue post-injury. The appellate court judgment was reversed on that precise issue.
Implications:
Public employers (e.g. municipalities, counties, state agencies) should confirm that their payroll systems apply withholdings consistently, even for PEDA payments, unless there is a compelling legal reason not to. This ruling clarifies ambiguity over whether payroll taxes constitute “other” deductions disallowed by PEDA’s general prohibition language.
Amendment to Workplace Transparency Act (IWTA) via HB 3638 — Legislative Change
Date Enacted: August 15, 2025 (covered in September commentary)
Summary:
Governor Pritzker signed HB 3638, which amends the Illinois Workplace Transparency Act. The amendments will take effect January 1, 2026, and apply to employment, settlement, and termination agreements entered, modified, or extended on or after that date. Key additions include:
- Expanded definition of “unlawful employment practices” covered by the Act
- Tighter restrictions on confidentiality or nondisclosure provisions that would limit reporting of unlawful conduct
- Prohibitions on contract terms that restrict employees’ right to engage in concerted activities (as defined under the National Labor Relations Act)
- Modified remedies and increased protections for employees bringing claims under IWTA
Implications:
Employers should begin reviewing their standard employment, termination, and settlement agreement templates to ensure compliance with the upcoming changes. Provisions such as nondisclosure or confidentiality clauses tied to claims of harassment, discrimination, or retaliation may need revision. Training and internal policies should be updated in advance of the 2026 effective date.
Illinois Expands Employee Leave & Workplace Protections (Preparatory Notice)
Date: September 18, 2025 (alert published)
Summary:
Though many changes are not effective until 2026, Illinois continues to expand protections for employees. The alert highlights that in addition to the IWTA amendments, other statutes (notably related to leave rights, anti-retaliation, and digital device protections) are being strengthened.
Implications:
Even before the effective date, employers operating in Illinois should plan compliance steps: updating leave policies, notifying employees of changes, reviewing digital device and remote work policies, and ensuring whistleblower and harassment complaint procedures align with heightened expectations.
Enforceability of Nondisclosure Provisions in Employment Agreements — SB 835 (Note: Broader Trend)
Date Effective: September 1, 2025 (for provisions involving sexual abuse disclosures)
Summary:
While not Illinois-specific, Senate Bill 835 prohibits enforceability of nondisclosure or confidentiality provisions in employment agreements (or settlement agreements) that prevent someone from disclosing sexual abuse or facts related to sexual abuse. This reflects a national shift away from blanket confidentiality in misconduct-related settlements.
Implications for Illinois:
Illinois employers should consider whether any of their confidentiality or nondisclosure terms would run afoul of this rule (or analogous state-level restrictions). Even though SB 835 is federal/other-state–oriented, best practices suggest reviewing settlement agreements and policies to ensure they do not unduly limit reporting of unlawful conduct.
Other Notable Developments & Enforcement Trends
Illinois Department of Labor equal benefits mandate upheld — In May 2025, a federal court refused to enjoin IDOL’s enforcement of equal benefits provisions under the Illinois Day and Temporary Labor Services Act, rejecting preemption arguments under ERISA.
“New employment laws” guidance issued — Observers continue to note changes to leave, independent contractor classification, pay transparency, and expanded protections set for 2025–2026.
Conclusion: Looking Back on Illinois Labor Law Updates from September 2025
If recent Illinois rulings on wrongful termination, wage theft, or discrimination have you rethinking your legal options, know that support is just a phone call away. At HKM Employment Attorneys in Chicago, our fearless attorneys have recovered over $250 million for clients since 2003 and regularly take on complex cases involving breach of contract, hostile work environments, and EEOC claims—backed by Super Lawyers and top‑tier recognition. We offer clear communication, strategic advocacy, and no-fee-unless-we-win representation. If recent case developments have struck a chord, reach out to our Chicago office to explore how we can stand with you and secure your workplace rights.
