Monday, January 24, 2011

Potential Exposure for Employers Under New Illinois Law

Changes to Illinois Wage Payment and Collection Act provide substantially more exposure to Illinois employers.

On January 1, 2011 changes to Illinois wage claim statute became effective.  The changes give employees substantially more leverage in claims for unpaid compensation.  The term compensation includes not just salary payments, but also benefits such as vacation pay, bonuses, commissions, incentives, etc.  So even an honest dispute about compensation can come within this new law.  The reason for concern is the increased potential damages can put employers at serious disadvantage.

Here are some of the important changes that give employees more leverage.

An employee in a private lawsuit against an employer can recover attorney’s fees.  This will encourage more attorneys to take wage claim cases since they can recover fees.  Those fees can be greater than the amount of the wages claimed.  This attorney fee’s provision is a one way street.  If an employer wins, there is no provision for getting the employee to pay the employer’s attorney’s fees.  This amounts to a “heads I win and tails you lose situation” for employees.

An employee who wins in a private lawsuit is also entitled to interest on the unpaid wages.  The interest is equal to 2% per month.  Yes, that is 2% per month (not per year).  The interest starts from the date that the payment should have been made up until it is finally paid.  In comparison, interest on judgments in Illinois is 9% per year.  And interest on judgments accrues from the time you win the lawsuit not from the time the claim arose.  So the interest under this law is not only at a much higher rate, but also it accrues from the time the claim arose.

There now is personal liability for the company’s officers even if they didn’t have knowledge of the dispute but have day to day operational control.  For many mid-size businesses that have human resources and payroll personnel handling employee compensation, the company’s officers who may also be its owners now have personal liability.   If lower level employees--say the payroll department person--have knowledge of the wage claim they now also can be personally liable.

For wages claims of $3,000.00 or less, the Illinois Department of Labor has the authority to hear those claims and now their findings will be binding.  An employer still can dispute the finding in the circuit court, but the standard for reversing that decision will be higher.

These changes mean that Illinois employers must be more careful about how they deal with employee compensation.  A dispute, if not resolved quickly, can be substantially more expensive for employers than the disputed amount.


Disclaimer This is a passive blog and the materials contained herein are provided for informational purposes only. Nothing contained in this blog should be interpreted as a solicitation of business and none of the information contained herein constitutes legal advice. The law is subject to change without notice, and the local laws of your residence may be different from the general information displayed on this blog. You should not rely on the information provided on this blog without first consulting an attorney. Contacting this website does not establish and attorney/client relationship between you and its publisher Christopher W. Matern. An attorney/client relationship can only be established with Christopher Matern by engaging in direct person-to-person contact with Christopher Matern. Christopher Matern does not intend to practice law in any jurisdiction in which he is not licensed.

3 comments:

  1. That sounds like a bunch of...I will refrain from the words that come to mind. This is why I hire independent contractors and not employees.

    ReplyDelete
  2. Do you know what caused this action? Are/were there a lot of employers not paying their employees. I had heard of employers being late with payroll but not neglecting to pay completely.

    Thanks for letting us know about this. It is always good to know about the environment we are surviving in.

    ReplyDelete
  3. Replying to both comments, the legislation was prompted by various types of compensation disputes. These disputes ranged from blatant non-payment to failure to pay overtime as well as not paying for vacation time. Because these cases typically represent low dollar amounts (from the perspective of bringing a lawsuit - as opposed to the perspective of the employee who is short payed) few lawyers would take the cases. Employers knowing this situation could take a more aggressive position with their employees. The new statute makes it more likely that lawyers will take the case since they can get attorney's fees awarded to them if they win.

    Responding to the comment about independent contractors, the question is are they really independent contractors. If under the IRS and State of Illinois guidelines they can be considered employees then they are legible to file suit under this law.

    ReplyDelete