Every January, Illinois drops a stack of new laws on businesses. This year is no exception. Between new leave requirements, expanded restrictions on employment agreements, significantly higher penalties for discrimination violations, and a property law that changes how squatters are handled, 2026 brought a lot for small business owners and property owners to absorb. Working with a Chicago, IL business contract lawyer can help you update your agreements, stay compliant, and avoid costly mistakes.
We’re going to walk through the changes that matter most — in plain language — so you know what to update, what to watch for, and when to call a lawyer.
NICU Leave: A New Unpaid Leave Requirement Starting June 1, 2026
If your business has 16 or more employees, you’ll need to provide unpaid, job-protected leave for workers whose newborns are admitted to a neonatal intensive care unit. How much leave depends on your size. Sixteen to 50 employees? You owe 10 days. More than 50 employees? Twenty days.
Employees can take this leave in increments as short as two hours, which means you’ll need to track intermittent absences. During the leave, you have to maintain the employee’s health insurance on the same terms as if they were at work. When they come back, they get their old job — or something substantially equivalent — with no loss of benefits.
You can ask for reasonable proof that the child is in the NICU, but you can’t request anything protected under HIPAA. And retaliating against someone for taking NICU leave is a violation of the statute.
If your employees are also covered under the federal FMLA, they have to use that first. But for smaller employers below the FMLA threshold, this is a brand-new obligation. Update your handbook now, not in May.
Workplace Transparency Act: Your Employment Agreements Probably Need Updating
The Illinois Workplace Transparency Act was already strict. It got stricter.
Before 2026, the law prohibited employment agreements from restricting an employee’s ability to report discrimination, harassment, or retaliation. The new amendments expand that dramatically. Now, agreements can’t restrict employees from reporting any violation enforced by the Illinois Department of Labor, the Illinois Labor Relations Board, the U.S. Department of Labor, OSHA, or the National Labor Relations Board.
That means confidentiality clauses, non-disparagement provisions, and restrictive covenants in your employment agreements, severance packages, and settlement agreements all need a second look. If any of those provisions could be read as discouraging an employee from reporting a wage violation, a safety issue, or an unfair labor practice, you’ve got a problem.
The amendments also protect employees who engage in concerted activity — talking to coworkers about working conditions, raising issues collectively with management. Agreements that restrict that kind of communication could now violate the statute.
This doesn’t apply retroactively. Agreements signed before January 1, 2026 are fine. But anything new, renewed, or amended after that date has to comply.
The Human Rights Commission Can Now Fine You Up to $70,000
This one should get your attention. Before 2026, the Illinois Human Rights Commission could award damages to employees who proved discrimination — back pay, emotional distress, attorneys’ fees. That’s still true. But now the Commission can also impose civil penalties on top of those damages.
First violation: up to $16,000. Second violation within five years: up to $42,500. Third or more within seven years: up to $70,000. Per violation. These penalties are designed to punish, not just compensate. And they’re not retroactive — they only apply to violations occurring after January 1, 2026.
The same amendment also eliminated the requirement for mandatory fact-finding conferences during discrimination investigations. That could speed things up — but it also means charges may move through the system faster than employers are used to.
The Squatter Bill: Property Owners Get a Faster Path to Removal
This one isn’t an employment law, but it matters to a lot of our clients who own commercial or rental property. Senate Bill 1563 — the so-called Squatter Bill — changes how Illinois handles unauthorized occupants.
Under the old framework, a property owner dealing with squatters often had to go through the full eviction process. That could take months, especially in Cook County. Meanwhile, the squatter stayed in the property and the owner had no recourse.
The new law reclassifies squatters as criminal trespassers. That means police can remove them on the spot if the property owner provides proof of ownership — a deed, a title, or other documentation. No court order required. No eviction timeline.
This doesn’t change how you deal with actual tenants. If someone has a lease and stops paying rent, you still go through the eviction process. But when someone occupies your property with zero legal right to be there, you now have a much faster remedy.
Practical advice: keep copies of your deed or title documentation for every property you own in a place where you can access them quickly. If you use property managers, make sure they know about this law and understand the difference between a squatter and a holdover tenant.
One More: The Grocery Tax Is Gone (Mostly)
If you sell food products, you’ve probably already noticed this one. Illinois eliminated its statewide 1% grocery tax effective January 1, 2026. But more than 650 municipalities adopted their own 1% local grocery tax to replace it. If you operate in one of those cities, the rate on groceries hasn’t changed — just the line on your sales tax return.
Retailers are responsible for verifying whether the municipalities where they make sales have adopted the local tax. If you have multiple locations, check each one. The Illinois Department of Revenue maintains an updated list, and you can verify rates using the MyTax Illinois Tax Rate Finder at mytax.illinois.gov.
Don’t Wait Until You’re Out of Compliance
Here’s the common thread across all of these changes: Illinois is expanding both the scope of regulated conduct and the consequences for getting it wrong. Penalties are higher. Leave requirements are broader. Agreement restrictions are tighter. And the window for getting into compliance is now, not next quarter.
Kravets Law Group works with small business owners and property owners throughout Illinois. Whether you need your employment agreements reviewed, your employee handbook updated, your estate plan revised, or help navigating a property dispute, we’re here to help.
Contact Kravets Law Group to get started.
For full text of all 2026 legislation, visit the Illinois General Assembly at www.ilga.gov.